April 28, 2008

 

Asia Grain Outlook on Monday: Corn prices hinge on U.S. weather

 

 

Corn prices could swing either way this week, depending on U.S. weather.

 

Drier weather in most parts of the U.S. could be bearish for prices as it will allow speedier planting, while wet weather could hamper planting.

 

According to an online commentary Friday by Tim Hannagan of Alaron Securities, Chicago Board of Trade corn futures may test contract highs this week if wet weather delays planting in major corn growing areas.

 

In Asia, Japan - one of the world's biggest corn importers - continues to progress smoothly with its imports for the third quarter of 2008.

 

A trader in a Tokyo-based multinational broking firm said 30% of Japan's corn buying for the third quarter has been completed.

 

Japan buys 15 million metric tonnes of corn annually, with the purchase divided equally between the four quarters.

 

Traders, however, said some Japanese buyers are holding back purchases as the sea freight cost remain high, at around US$125 a tonne for the U.S. Gulf-Japan route.

 

They said there is some expectation among buyers freight costs may ease in the near term, on rumors of a resumption of the Argentine farmers' strike soon that could cut Chinese corn buying from Argentina and thus relieve some pressure on Panamax-sized vessels.

 

The strike rumors are also affecting Chinese soybean imports.

 

China's booking of soybean shipments dropped sharply last week as Chinese traders are apprehensive about the strike resuming in Argentina and how that could affect soybean shipments from that country.

 

China is the world's largest soybean importer and Argentina the third largest soybean exporter.

 

Chinese importers booked 4-6 cargoes of soybeans from the U.S., Argentina and Brazil last week, down from 17-19 cargoes in the preceding week, according to data issued by commodities information firm Shanghai JCI last Friday.

 

The cargoes will be delivered in June and July, Shanghai JCI said.

 

In other news, India's federal government said last week it is planning to build a strategic foodgrains reserve of 5 million tonnes, which will be in addition to the 27-million-tonne grains buffer stock the government has traditionally maintained.

 

The move comes on the heels of sharp criticism by opposition political parties as well as the government's alliance partners about the sharp domestic rise in food prices.

 

Analysts blame the country's raging food prices on the country's failure to invest in new farm technologies over the last decade and a host of farm subsidies and trade restrictions that distort the agricultural market.

 

"India's current food price problem isn't a market failure. Rather, it's a government failure to allow markets to work," said Swaminathan S Anklesaria Aiyar, a well-known columnist and Cato Institute fellow, in the Wall Street Journal Asia Monday.