North American rains to support Asia's grain prices

Asian grain prices are likely to get some support this week from continuing rainfall in North America that is hindering spring planting, according to traders and analysts.

 

Many Northeast Asian buyers have locked in supplies of feed wheat this month at prices between US$190 and US$200 a tonne, basis cost and freight, but may have to shell out more in future deals due to bullish sentiment related to the rains, they said.

 

The weather had been perfect, but the recent rains have created some concerns, said Jay O'Neil, senior agricultural economist with the International Grains Programme at Kansas State University.

 

These weather concerns can support prices for the time being, but it still is not clear whether higher prices will be sustained, he said.

 

However, around 20% of the agricultural area in western Canada may not be planted with grains this year due to the recent heavy rains. The rains in Canada and the Upper Midwest of the US are definitively supportive for wheat prices, a Tokyo-based commodities analyst said.

 

If the rains persist, prices on the Chicago Board of Trade could rise closer to US$4.70/bushel this month, traders said. On Tuesday (Jun 15), July wheat futures on the Chicago Board of Trade closed 1/4 cent at US$4.51 3/4 a bushel. Even if the rains taper off, it will be too late for Canada's unfinished crop plantings to take place now, a Singapore-based executive at a global trading company said.

 

O'Neil said even Ukraine's wheat harvest has been affected by adverse weather, and there are concerns that next season's plantings may be lower due to a decline in prices earlier this year.

 

Ukraine is a major supplier of feed wheat to Asian countries such as South Korea.

 

Last week, Korea Feed Association bought a cargo of 55,000 tonnes of feed wheat at US$193.90/tonne on a cost-and-freight basis. It also bought cargoes at US$197.39/tonne and US$198.39/tonne. "Recent purchases have been at attractive prices but they may not be sustained," said a Seoul-based trader.

 

In other news, Bangladesh has purchased 100,000 tonnes of wheat of optional origin in a tender at US$227.83/tonne, C&F, from private company Pubali Traders.

 

Japan plans to finalise a tender Thursday (Jun 17) to import 126,500 tonnes wheat from Australia, Canada and the US.