April 28, 2011

 

Delayed US spring plantings pose threat for Asian grain prices

 

 

Asian grain prices may rise next month due to weather concerns in the US, one of the world's major agricultural exporter, according to traders and analysts.

 

Global trade and business officials painted a bullish picture for agricultural commodities during a grains conference in Singapore this week, focusing on potential loss of yields due to behind-schedule US spring crop plantings.

 

"The stocks situation in corn is precarious. We can't afford to have another round of adverse weather," Kansas State University Senior Agricultural Economist Jay O'Neil said.

 

Corn plantings in the US are behind schedule amid lingering heavy snow cover in many areas and excess rains in some parts. Barely 9% of the corn intended for planting is seeded so far. Usually by this time of the year the figure is close to 45%, O'Neil said.

 

Analysts and traders said that if planting delays persist, losses in yields will result, which could push up benchmark Chicago futures prices to record highs of US$8-$9 a bushel.

 

Earlier this month, CBOT May corn futures rose above US$7.80/bushel for the first time. The near-month contract is currently around US$7.62/bushel.

 

Weather concerns aren't restricted to corn alone.

 

Amid a drought in the southwestern US, it is very important that spring wheat plantings progress well as global supply of high-protein wheat is very tight, said Michael M. Spier, Vice President for South Asia at US Wheat Associates.

 

Southwestern US is a major producer of hard winter wheat.

 

US hard winter wheat output may fall by as much as 26% to around 750 million bushels in the crop year that begins June 1, due to the drought, said Emily French, Managing Director at US-based consultancy ConsiliAgra.

 

Many parts of Texas have received barely 25% of their normal rainfall so far this year, while in Oklahoma rainfall levels are only 30%, O'Neil said.

 

Hard winter wheat, used worldwide for bread-making, comprised around 46% of US wheat output in 2010-11. More than half of the country's hard winter wheat output is projected to be exported this year.

 

Traders expect hard red winter wheat futures for July delivery on the Kansas Board of Trade to rise above US$10/bushel in the next few weeks. The contract is currently around US$9.60/bushel.

 

Recent cancellations and deferment of soy imports by China - the world's largest soy importer – have kept prices in check, but the perception is gaining ground that the commodity will lose planting area to corn this year in the US and China.

 

In the marketing year that begins October 1, China's soy imports may rise to a record 60 million tonnes, US-based agricultural trade consultant John Baize said. Imports in 2010-11 will likely be around 53-54 million tonnes.

 

Baize said this may push up new-crop November CBOT soy futures to as high as US$16/bushel, from around US$13.65/bushel currently.