June 11, 2008

 

Asia Grain Outlook on Wednesday: Corn may rise on lower U.S. yield concerns

 

 

Corn prices may continue to rise during the remaining days of the week as the U.S. government has projected lower yields for the current crop being sown in that country as well as tight U.S. stocks.

 

The U.S. is the world's largest producer and exporter of corn.

 

In Asian morning trade, the Chicago Board of Trade July corn contract hit an all-time high, surpassing the previous high of US$6.74 a bushel set in the final minutes of Tuesday's pit trading.

 

At 0620 GMT, the contract was trading at US$6.79 a bushel, up 6.2 cents from Friday's pit-trade closing.

 

Meantime, a report released by Barclays Capital last week said the fundamentals for corn in the next marketing year, beginning September 1, are quite bullish, with expectations of a fall in global output and tight stocks amid a robust demand.

 

However, it said the only bearish factor for corn could be a backlash against biofuels in the U.S., which may lead to a freezing of the ethanol mandate at the current annual level of 9 billion gallons. Since 30% of U.S. corn is used to produce ethanol, any slackening of demand could be bearish.

 

However, Barclays estimates the average corn price in 2008-09 at around US$6.3 a bushel compared with US$4.3 a bushel in 2007-08.

 

In other grains, the Philippines rice import frenzy seems to have cooled down, with the government indicating it may not buy 50,000 tonnes brown rice recently offered by Japan.

 

An auction for allotting import quotas Wednesday received a lukewarm response from Philippine traders, who committed to import only 27,630 tonnes of rice against a quota of 200,000 tonnes.

 

The Philippines is also hoping for a bumper rice harvest of 17.32 million tonnes this year, which will also reduce its need for imports, though the country may still import a total 2.1 million tonnes of rice in 2008.