June 9, 2008

 

Asia Grain Outlook on Monday: Crude, dollar, weather to support prices

 

 

Grains prices are likely to stay higher in the week ahead due to rising crude oil prices and the effects of wet weather on crops in the U.S.

 

After ending higher in Friday's pit trade, all grains futures traded on the Chicago Board of Trade are trading higher in electronic trade so far.

 

At 0655 GMT, the CBOT July corn contract is 19.25 cents higher at an all-time high of US$6.70 a bushel, July wheat is up 24 cents at US$8.35/bushel, and the July soybean contract is 23.5 cents higher at US$14.81 cents/bushel.

 

Apart from wet weather, which is hampering the sowing of corn and harvesting of wheat in the U.S., the weaker dollar is also a bullish factor for grains prices because it makes U.S. exports cheaper in terms of other major international currencies.

 

Analysts said that while the current rise in grains prices coincides with rising crude prices, it's uncertain whether the close relation between movements in these commodities will persist in the near term.

 

"A whole range of factors are influencing grains prices, so its not clear at all whether a one-on-one relationship between grains and crude prices will continue," said Vijay Iyengar, managing director of Singapore-based grains trading firm Agrocorp.

 

Con Williams, an economist with Meat & Wool New Zealand, said other major factors influencing grains prices include speculative activity and trade policy distortions by grain-exporting countries.

 

"Grains prices will eventually hit a new equilibrium. But until then, the only certainty is there will be lots of volatility," said Williams.

 

In deals last week, Japan's Ministry of Agriculture bought a total 153,000 metric tonnes of wheat from the U.S., Australia and Canada in a tender.

 

Meantime, Chinese traders imported three-to-four soybean cargoes last week for July delivery, mostly from Brazil, said commodities analysis firm Shanghai JCI.

 

However, high soybean prices in the U.S. and the farmers' strike in Argentina kept most Chinese importers mostly on the sidelines.