March 30, 2009

Asian grain prices may ease in coming days as a strengthening U.S. dollar weighs on bellwether Chicago Board of Trade contracts as the focus shifts to Tuesday's U.S. Department of Agriculture planting intentions and quarterly grain stocks reports, market observers said.

 

The USDA planting and stocks report is among the most keenly watched surveys as it provides the first forecast into future acreage and production for the major U.S grains, including corn, soybeans and wheat, analysts said.

 

"Since 1999 corn prices have displayed the greatest sensitivity to the U.S. prospective plantings survey with prices rising when farmers declare their intention to cut corn plantings," Deutsche Bank said in a quarterly commodities outlook later Friday. "This reflects the fact that the U.S. represents approximately 60% of world corn exports and consequently changes in U.S. acreage levels can have an important bearing on the global corn export market."

 

"A reduction in corn plantings of more than 0.1 million acres would tend to encourage price gains. However, the relative price of corn to soybeans indicates that the incentive to switch will not be as compelling in 2009 as it has been in previous years," it said.

 

Analysts Friday estimated on average that the USDA will project corn acreage at 84.548 million acres, down from 85.982 million in 2008 and lower than the government's projection of 86 million in February. Analysts also projected that U.S. corn stocks as of March 1 will be 7.003 billion bushels, up from 6.859 billion at the same time a year ago.

 

CBOT's May corn contract slid 3 3/4 cents to US$3.87 per bushel Friday, weighed down by softer crude oil prices and equities. Traders said the focus in coming sessions, along with the USDA plantings report, will remain on global economic concerns.

 

In the Philippines, corn output in the first six months of the year is expected to decline 2.6% from the same period last year to 3.2 million tonnes due to unfavorable weather conditions, according to a recent Department of Agriculture production survey.

 

The volume of corn imports has already exceeded the country's minimum access volume, or MAV, of 216,940 tonnes for 2009, but only 43% of the MAV quota has been filled because some of the imports have come from fellow Association of Southeast Asian Nations members Thailand and Indonesia.

 

MAV refers to the volume of sensitive commodities that the Philippines has committed to bring in at a preferential tariff rate under its commitments to the World Trade Organization.

 

Philippine feedmillers have imported around 800,000 metric tonnes of feed wheat and 300,000 tonnes of corn so far this year, industry observers said Friday.

 

Wheat prices may also weaken in coming days after CBOT wheat contracts ended Friday lower, with the May contract down 7 1/4 cents to US$5.07 1/4 a bushel, traders said.

 

In China, a greater incidence of crop diseases this year has severely damaged the outlook for wheat and rapeseed production in key producing areas, the country's Ministry of Agriculture said.

 

As of last Wednesday, 1.39 million hectares of standing wheat was hit by wheat stripe rust, a fungus that affects yield, the ministry said in a statement posted on its Web site - up 52% from the same time last year. China's wheat acreage this year has been estimated at 24 million hectares.

 

CBOT rice also slipped Friday, with the May contract down 24 cents at US$12.37 1/2 per hundredweight, with traders attributing the decline to dollar strength.

 

Further downside appears likely, with a test of US$12.00/hundredweight possible, though the focus is on Tuesday's planting intentions report, said a trader in Tokyo.

 

In the Philippines, paddy-rice output in the first six months of the year is likely to rise 4% to 7.4 million metric tonnes, Agriculture Secretary Arthur Yap said Friday.

 

The expected increase is due to increased acreage as higher domestic prices encouraged farmers to plant more, he said.

 

In India, exports of rice and wheat have made little progress due to slow responses from importing nations and procedural delays associated with upcoming elections, people in the government familiar with the matter said Friday.

 

Of 55,000 tonnes of rice exports allowed to four African nations - Ghana, Nigeria, Senegal and Cameroon - only Ghana has imported an allotment, of 15,000 tonnes, since the go-ahead six months ago.

 

Soybean prices are also likely to stay weak in coming sessions after the CBOT May soybean contract slid 27 cents to US$9.17 Friday, as an absence of fresh supportive news prompted traders to reduce risk exposure, observers said.