March 18, 2009

Asian grain prices will likely rise in coming days on the back of steady Chicago Board of Trade contracts, while the outlook for rice prices has turned decidedly stronger following recent heavy losses.

 

CBOT rice had come under heavy selling pressure in recent days from weak technicals and poor demand. The May contract fell to an 18-month low Monday before rising by the 50-cent daily trading limit to US$11.95 per hundredweight Tuesday. The recent steep fall has made U.S. rice very competitive, traders said.

 

In Asia, Thai rice exports to Japan look set to rise after Thailand successfully solved problems related to aflatoxin-tainted rice, the Bangkok Post reported Wednesday.

 

Thailand has won bids to export up to 90,000 tonnes of rice to Japan this month and shipments are expected to top 200,000 tonnes this year, it said.

 

Japan bought around 220,000 tonnes of Thai rice in 2008 but suspended rice tenders for two months late last year after discovering tainted rice in some shipments, in a scandal that forced its agriculture minister to resign and the ministry to tighten import regulations for both rice and wheat, the report said.

 

Meanwhile, the Thai cabinet Tuesday approved spending of THB30 billion (US$838 million) to buy 2.5 million metric tonnes of rice paddy from the second crop, a government spokesperson said.

 

The buying, aimed at boosting domestic rice prices, will be done from March to September, Suparuk Kournha, a deputy government spokesperson told reporters.

 

CBOT wheat futures also extended gains Tuesday as crop concerns due to dry weather triggered short covering. CBOT's May contract settled up 8 1/4 cents at US$5.52 1/2 a bushel.

 

Dryness continues to be a worry for the markets, despite forecasts that indicate precipitation may be on the horizon, analysts said.

 

"Further gains are probable in CBOT wheat contracts, with a test of US$5.80 a bushel immediate resistance likely in the near term, followed by a test of the US$6.00 a bushel overall resistance. But the focus is also very much on external markets, as well as the crop in the U.S.," said a Tokyo-based grains trader.

 

Japan's Ministry of Agriculture, Forestry and Fisheries said Tuesday it is seeking 106,000 metric tonnes of wheat in a tender to be concluded Thursday.

 

CBOT corn contracts ended a three-day rally Tuesday, but the downside potential is likely to be limited due to recent stability in the crude oil market and steady equity markets, the Tokyo-based trader said.

 

A breach of the US$4.00 psychological resistance level will likely pave the way for a test of US$5.00 "within the next two months," he said.

 

CBOT's May corn contract ended down 1 cent at US$3.90 1/2 per bushel.

 

CBOT soybean futures ended higher Tuesday, with the May contract rising 2 cents a bushel to US$9.13.

 

In India, low soybean stocks, gains in crude oil prices and robust demand indicate further gains are possible, analysts said.

 

"There is good demand for soybean products in the local market while arrivals are hardly 1,000-1,500 bags (of 100 kg each) as it is the end of the harvesting season," said Karvy Comtrade analyst Veeresh Hiremath.

 

Meanwhile, India's soymeal exports are likely to benefit from a poor soybean crop in Brazil and Argentina, but slower purchases by customers due to the economic slowdown could damp any hopes of a rise in shipments from a year ago, traders said.

 

In other news, wheat growers in Western Australia state - the heartland of the nation's wheat export industry - could soon have access to local wheat futures and options that could become national and Asia zone price benchmarks, Dougal Hunter, ASX Ltd.'s (ASX.AU) manager of agricultural derivatives, said Wednesday.

 

Establishing a Western Australian milling wheat futures contract, to be known as WAW, will build on a suite of ASX product offerings set up to cover domestic grain markets on Australia's east coast earlier this decade, he said.

 

"Now, with the liberalized export market, there's a new opportunity for a new contract that better services the needs of export-oriented business, be it grower or industry or end user," Hunter said.