March 22, 2009

The weakening dollar may boost US grain exports but it will likely be short-lived as US grain supplies are one of the most expensive in the world market, US traders and analysts said Thursday (Mar 19).

A rally in grain and soy prices will likely dampen longer term export prospects, traders and analysts said.

Some countries might come in and hedge, thinking the prices would stay, but the commitment is not there because they can easily cancel the sales and retender, said Citigroup grains analyst Terry Reilly.

The dollar dropped for a second consecutive day on Thursday after the Federal Reserve (Fed) said it will purchase long-dated Treasuries over the next six months.

USDA said corn export sales last week reached 440,000 tonnes, down 60 percent from the previous week. Wheat exports for the current and new marketing years totalled 235,800 tonnes, down 41 percent from a week earlier.

The higher cost of US corn and wheat against other suppliers has hurt exports, while an increase in ocean freight since January has some overseas buyers sourcing more domestic grains.

Reilly said the US has or has nearly the most expensive wheat in the world.

Soy sales last week, as with corn and wheat, were lower than expected and were projected to decrease in the weeks and months ahead as more freshly harvested South American supplies enter the market, traders said.

But uncertainty about Argentine exports amid tensions between farm groups and the government over export taxes may benefit US exports.

Soy export sales totalled 339,800 tonnes in the latest week, far below trade expectations for 500,000 to 700,000 tonnes.