June 11, 2007

 

Asia Grain Outlook on Monday: Prices may rise further; US weather Key

 

 

Prices of imported grains in Asia may rise further this week, led by gains in corn prices in Chicago, low inventories and lower-than-expected U.S. crop yields, traders said.

 

July corn futures on the Chicago Board of Trade rebounded from Friday's profit-taking, which saw prices settling 2 3/4 cents lower at US$3.82 per bushel, to trade around US$3.90 to US$4.00/bushel Monday.

 

"It's currently a weather market, and the weather in the U.S. is still a bit too wet in some areas and too dry in others," said a researcher based in Shanghai.

 

The U.S. Department of Agriculture released its supply-and-demand report Monday, projecting the 2007/08 corn crop yield at 150.3 bushels per acre, lower than the 154 bushels/acre estimated by Morgan Stanley's analysts in a June 10 report.

 

The USDA's estimate reflects the "slower-than-average planting pace," said the official report. Ethanol use was also pegged above 3.4 billion bushels for the first time, on the "continued expansion in ethanol plant capacity and profitability for ethanol producers."

 

Corn supply in China is expected to remain tight until October, when the new corn harvest usually begins.

 

The rally in corn prices has resulted in farmers using more acreage for corn and less for soybean, tightening inventories and supporting prices.

 

"With low stock levels, the current price can go higher, and it has to in order for Brazil to be encouraged to increase its soybean acreage, given its appreciating currency," said a Tokyo trader.

 

According to Shanghai JCI Intelligence Co., U.S. soybean premiums have risen to over 200 cents/bushel over the CBOT July soybean contract, from around 190 cents/bushel last month.

 

Hence, China crushers have mainly made their buys from Argentina for July shipment at a premium of 146-160 cents/bushel over the CBOT July soybean contract.

 

On the tenders front, Japan's Ministry of Agriculture, Forestry and Fisheries has bought 80,000 metric tonnes of wheat in a tender concluded last Thursday, an agriculture ministry official said. The wheat is scheduled to arrive between July and August.