March 19, 2007

 

Asia Grain Outlook on Monday: Corn may fall on higher US acreage

 

 

Corn prices in Asia may fall in the week ahead as U.S. traders become increasingly convinced about a sharp rise in acreage that U.S. farmers intend to plant to corn this year.

 

The market is increasingly gravitating toward an estimated 88 million acres versus 78.3 million acres last year.

 

In this regard, it is keenly awaiting a critical U.S. Department of Agriculture report March 30 which will give its projection.

 

The reason for the jump in corn prices over the past several weeks is the exponential rise in demand for corn from the U.S. ethanol sector.

 

Analysts believe that even with expanded acreage, 2007 will still see average corn prices staying high, as demand from U.S. and international customers is expected to keep rising.

 

Analysts also said soybean prices may remain supported over the next few weeks as the USDA data may indicate farmers planning to cut acreage planted to soybeans this year, in favor of corn.

 

But for both U.S. corn and soybean crops, a big unknown is the weather. With reports of La Nina weather conditions growing, a drier U.S. summer is quite possible, which may affect output of every crop, and in an already tight supply situation, especially for corn and wheat, that could fuel further price gains in the second half of this year.

 

For wheat, some interesting news came from India, where the federal government has asked the state-run State Trading Corporation "to take preparatory steps" to import up to 3 million tons of wheat.

 

While no one is sure what the government exactly means by preparatory steps, U.S.-based commodity traders AgResource Co. said it believes India may eventually end up importing 3 million to 5 million tons of wheat this year.

 

The Indian government has also decided to extend the period up to which private traders can import duty-free wheat to December.

 

"When India will commence seeking wheat in the world market is unknown, but based on the profits that some private importers could achieve, we expect that they will be seeking wheat from the Black Sea (region) in the short term," said AgResource.

 

In other Asian market news, commodity analysts JCI Shanghai said Chinese traders continued their brisk pace of soybean imports, buying 10-12 soybean cargoes last week, with 7-8 of Argentine origin and 3-4 of U.S. origin, all for April or May shipment.

 

JCI said the price for Argentine soybeans is currently around 128-134 U.S. cents/bushel to the Chicago Board Of Trade May soybean contract, and for US soybeans at 130-135 cents/bushel to the CBOT May soybean contract, for shipment from western U.S. ports.
 

"Such low soybean (prices) may be the main reason attracting Chinese crushers to actively import soybeans (at present), said a JCI analyst report.

 

It added that soybean shipments to China may touch 2.9 million to 3.1 million tons in April, compared with an expected 2.7 million to 2.8 million tons in March.