March 21, 2007

 

Asia Grain Outlook on Wednesday: Prices may stay rangebound until month-end  

 

 

Grains prices in Asia may stay rangebound for the rest of the month as market participants await the U.S Department of Agriculture's crop sowing intention report for the summer crop, due out March 30, traders said Wednesday.

 

The report will be key to market sentiment as it will give the earliest reliable indication on how much corn, wheat and soybean U.S. farmers will plant this summer.

 

While most analysts are expecting sharp gains corn acreage at the expense of soybean, the picture could change depending on weather during the next fortnight.

 

Moreover, already high grains prices are keeping most Asian buyers away from the market for the time being, with those in the market buying only hand-to-mouth, they said.

 

Purchases have been slow since the start of the year, with buyers using occasional dips in the market to buy what they need. The last corn tender reported in Asia, by Taiwan's Members Feed Industry Group, was on March 14.

 

The last traded premium for U.S. corn shipped to Taiwan was 155 U.S. cents/bushel to the Chicago Board of Trade July contract.

 

Soybean import tenders from South Korea and Taiwan, two major Asian importers who report their tenders regularly, have been almost nonexistent so far this year.

 

Meanwhile, Japan's Ministry of Agriculture has completed its wheat import program for this financial year ending March 31. It is unclear whether the ministry will resume weekly wheat import tenders from the start of the next year itself, without waiting for prices to come down.

 

But in what could be a sign that prices are unlikely to ease any time soon, India's Central Organization for Oil Industry and Trade said Indian oilseeds output will fall 5.8% on year to 22.6 million tonnes in the current crop year ending June.

 

According to U.S.-based commodity trading firm AgResource Company, weather might be a major driver of global grains prices in the near-term.

 

"Its weather that will have an increasingly larger impact on price as the Northern Hemisphere growing season nears," it said in a daily report.

 

"So far E.U, Chinese and Russian weather forecasts have been normal. It's the US where there is potential for too much rain over the next 10-14 days," the AgResource report said.

 

Analysts said while rains will be beneficial for the developing winter wheat crop in the U.S. and therefore bearish for wheat futures, the likelihood of stormy weather in central United States in late-March and early April could disrupt field preparations for the next corn crop, which could be bullish for corn.

 

A delay in corn planting could limit the ability of farmers to switch to corn despite high corn prices and force farmers to stick with soybeans.