May 28, 2007

 

Asia Grain Outlook on Monday: Prices high on weather, supply concerns

 

 

Prices of imported grains in Asia are likely to remain high in the week ahead, following a broad rally in prices on the Chicago Board of Trade last week on concerns over dry weather in the U.S. and limited stocks.

 

Rising freight costs are also expected to maintain upward pressure on grain prices, traders said.

 

Soybean, corn and wheat futures contracts on the CBOT ended mostly higher last Friday ahead of the long weekend.

 

The U.S. futures market is closed Monday for the Memorial Day holiday.

 

"Cash grains prices will depend on the weather over the next two months, particularly in the U.S. as crops there enter the critical growth stage," said Thomas Lee Bauer, head of research for Rabobank International in Singapore.

 

Farmgate prices for corn in major producing regions in the U.S could stay around US$4.00 a bushel or higher in the next two months if dry weather persists, he added. U.S corn is currently offered between US$3.50 and US$4.10 a bushel in different regions.

 

Analysts added that global soybean prices are also expected to hold firm in the near term because of likely lower plantings in the U.S. as more farmers switch to corn in the wake of rising biofuels production and strong demand worldwide for vegetable oils.

 

On the wheat market, Asian traders are awaiting results of India's tender to buy 1 million metric tonnes of wheat for an indication of the trend in prices.

 

Tender results are expected this week. According to government officials, the bids that have been submitted range from US$265.50/tonne to 302.00/tonne.

 

In China, Asia's largest exporter of corn, traders expect corn prices to continue rising ahead of the September harvest.

 

Concerns that a recent spate of dry weather in China's northeastern corn belt may affect the coming harvest have contributed to record high prices since 1995, said traders.

 

"Stock levels are already significantly lower than they were five or six years ago," said a Beijing-based analyst.

 

In deals last week, the Korea Corn Processing Association, or Kocopia, bought 110,000 tonnes of optional-origin corn from trading house Bunge at a tender concluded Wednesday.

 

If the corn is of Chinese origin it will be supplied at US$229.74/tonne, while U.S. or South American corn will be supplied at US$239.74/tonne.

 

Japan's Ministry of Agriculture, Forestry and Fisheries bought a total 110,000 tonnes of wheat from the U.S. and Australia in a tender that concluded Thursday.