March 26, 2010

 

Asia Grain Outlook on Friday: Prices likely subdued as buyers on sidelines

 

 

Asian grain prices are likely to be subdued early next week because of ample supply in the market and buyers adopting a cautious approach before making any purchases.

 

Traders are looking ahead to key government reports to be released March 31. The U.S. Department of Agriculture will release planting intentions and quarterly grain stocks reports that day.

 

If the ongoing harvest of soybeans in Brazil and Argentina is taken into account, the prices of nearby months on the Chicago Board of Trade should be much lower than current levels, said a Tokyo-based analyst.

 

The analyst said most traders expect prices to fall over the next two months and are therefore keeping to the sidelines.

 

The May soybean futures contract on CBOT settled 17 1/2 cents or 1.82% lower Thursday at US$9.42 1/2 per bushel.

 

Traders said that by end-May, prices are likely to fall to around US$8/bushel.

 

"Most buyers are already well covered until May and therefore want to buy only small volumes for June shipment and wait until prices have bottomed out before they go for higher purchases," said an exporter in Singapore.

 

He said due to logistical problems including a lack of trucks, movement of soybeans from warehouses to ports is slow but is expected to gain momentum next month.

 

Prices of corn are also headed downwards due to not only ample supply but also a likely rise in plantings in the U.S.

 

According to estimates of compound feed manufacturers in Japan, the corn area in the U.S. may rise by 2.5 million acres in May plantings due to a shift away from wheat.

 

The U.S. is saddled with a large stockpile of wheat, and this is expected to draw growers toward corn.

 

Importers in Japan expect corn futures on CBOT to fall to around US$3.20/bushel by May. CBOT May corn futures ended 10 cents lower Thursday at US$3.55, while the July contract closed 9 3/4 cents lower at US$3.66 1/4.

 

CBOT wheat futures are also expected to decline toward US$4/bushel from current levels of around US$4.66 due to high stocks.

 

Global wheat stocks are likely to rise to 199 million tonnes in 2010-11 to a nine-year high, the International Grains Council said in its latest estimates Thursday.

 

Analysts said U.S. wheat is costlier than other origins and may adjust to lower levels to become competitive.

 

Around 75% of the world's wheat output is from winter plantings, which are mostly harvested in July and August; this large crop is likely to be factored into prices in May.

 

Japan didn't issue any regular tender to import wheat this week, indicating that there is no hurry to purchase as prices may fall further.