May 28, 2008

 

Asia Grain Outlook on Wednesday: Rice prices seen supported in near term

 

 

Asian rice prices are likely to stay supported in the near term, despite prices having fallen over the past few weeks.

 

Traders in Hanoi and Bangkok said the rising cost of farm inputs such as fertilizers and fuel would limit any decline in prices due to an increase in rice stocks, as major Asian rice producers such as Thailand and Vietnam are concluding their harvests.

 

They added Cambodia's decision Monday to lift a ban on rice exports, in place since March, is unlikely to have much of an impact on Asian rice export prices.

 

Cambodia has traditionally exported around 400,000 metric tonnes of rice annually to Vietnam through the land route, as Cambodia's only major port is too far from producing areas.

 

Despite Cambodian Prime Minister Hun Sen saying Monday the government would allow rice exports of up to 1.6 million tonnes, traders said the actual rice exports may not exceed 400,000 tonnes this year.

 

The prices of both Thai and Vietnamese 5% broken rice are currently stable at around US$900/tonne, a level traders said may be sustained in the near term.

 

Meanwhile, Malaysia has said it will seek rice from Vietnam to bolster its stocks, though it didn't indicate how much rice it wants to buy.

 

Earlier this month, it decided to buy an additional 500,000 tonnes to maintain a buffer stock equivalent to three months' requirements and has already purchased 200,000 tonnes from Thailand.

 

In other news, Pakistan has scrapped a 10% import tax on wheat, ahead of the government concluding a tender to import 75,000 tonnes on June 7.

 

A rise in the prices of food articles has stoked inflation in the three major South Asian economies - India, Pakistan and Bangladesh.

 

In deals this week, Japan's Ministry of Agriculture is seeking 31,000 tonnes of feed barley and 63,000 tonnes of feed wheat in a simultaneous buy-sell, or SBS, tender to be concluded June 11.

 

Grain importers in Asia are unlikely to get any respite from the current high ocean freight costs in the short term, according to London-based analysts.

 

They said the fundamentals for dry bulk shipping remain strong, with the Chinese demand for steel and iron ore remaining steady.

 

The analysts also said the freight market will continue to remain volatile.

 

Grain importers in Japan and South Korea, Asia's biggest corn importing countries, are likely to resume corn imports next month after lying low in May as both countries have sufficient stocks for now.