March 26, 2008

 

Asia Grain Outlook on Wednesday: Grain prices to track outside markets

 

 

Grain prices are likely to track wider macroeconomic indicators for the rest of the week, just as they have done over the past several sessions.

 

The improvement in outside markets Tuesday pushed up wheat, corn and soybean futures on the Chicago Board of Trade, with the trend continuing in Wednesday's electronic trade.

 

At 0705 GMT, the CBOT May soybean contract was up 35 cents at US$13.42 a bushel, while May corn was up 4.2 cents at US$5.49/bushel and May wheat was up 1.2 cents at US$10.68/bushel.

 

The grain market is eagerly awaiting the U.S. Department of Agriculture U.S. grains planting report on March 31, which is widely expected to be bullish for grain prices.

 

A report by Barclays Capital noted high wheat prices are leading to a rise in global wheat plantings, with Egypt planting wheat on 3.2 million acres, a 10-year high, and that India is expecting a good wheat harvest with the harvesting season on in full swing.

 

Separately, the report said China is expected to become a net corn importer in 2-3 years, which could be bullish for global corn prices.

 

Meantime, South Korea has increased the import quota for feed corn and soybean at current tariffs.

 

The government said Tuesday it plans to raise the import allowance for feed corn by 6.3 million metric tonnes to 11 million tonnes in 2008 and by 677,000 tonnes to 1.7 million tonnes for soybean.

 

However, traders said the increase in import allowances was unlikely to lead to an actual rise in imports by private traders, since demand for feed corn and soybean in a mature market like South Korea is quite static, with annual feed corn imports at 6 million tonnes and soybean imports at around 1.4 million tonnes.

 

In tenders, it has been a quiet week so far, with Japan's Ministry of Agriculture deciding not to hold its weekly wheat purchase tender this week.