June 24, 2009

Grains prices in Asia will likely remain weak in coming days amid a general lack of firm direction, while bellwether Chicago Board of Trade futures will likely continue being led primarily by external factors ahead of a key U.S. Department of Agriculture acreage report next week, traders said.

 

CBOT grains fell across the board in Asian trading Wednesday, surrendering Tuesday's mild gains, which in turn were mainly attributable to short covering on the back of a slightly weaker dollar and steadier crude oil prices, traders said.

 

"The market generally appears to be in correction mode," said a trader with a major Tokyo-based commodities house. "Fundamentally, there's not much in the way of supportive news specific to grains so the focus will stay on outside markets in coming days."

 

Tuesday, CBOT July corn settled marginally higher at US$3.89 a bushel, though in Asian trading Wednesday, it edged down to US$3.86 a bushelin sluggish volume.

 

The focus is now on the USDA acreage report, due June 30. While most analysts said they are expecting U.S. corn acreage to have been reduced slightly, expectations of a good U.S. crop and favorable weather will likely cap upside potential, traders said.

 

The corn acreage expectations stem from a soggy spring that kept U.S. corn growers out of the fields, particularly in the eastern corn belt. That prompted some of them to switch to soy or take insurance rather than plant corn late and risk reduced yields.

 

"I don't expect to see too much activity in corn trading in the near term, with prices likely to continue fluctuating around current levels, while US$3.60 remains a strong support level," said the Tokyo-based trader.

CBOT wheat also settled higher Tuesday, again in lackluster trade, with traders attributing the rise to short covering and said the generally bearish outlook remains intact amid the advancing winter wheat harvest in the U.S. At 0623 GMT e-CBOT wheat was trading down 0.60 U.S. cents at US$5.46 a bushel.

 

Meanwhile, India's Food Ministry Wednesday approved the export of up to 650,000 metric tonnes of wheat products, but will decide whether to ease a ban on non-basmati rice exports only after viewing the progress of the annual monsoon rains, a senior ministry official said.

In China, the Ministry of Commerce has revised its estimate of June soy imports to 4.34 million metric tonnes from 4.62 million tonnes, a report on the ministry's Web site said Tuesday.

 

Despite the revision, China's June soy imports were still at a record monthly high, though the recent increase in imports has sparked fears among market participants that supply could begin to pressure soy prices.

 

"The robust pace of China's soy imports has been the key factor on the demand side for the rally in (CBOT) prices in 2009 owing to its position as the world's largest consumer and importer," Barclays Capital said in a note this week.

 

"However, the strong level of imports has been driven in part by China's stockpiling plan and imports could potentially slacken in coming months from their strong levels earlier this year," BarCap said.

Indonesia may face food shortages within the next five years as farmland converted to industrial or commercial use is lost to agriculture, the Jakarta Globe reported Wednesday, citing officials and a lawmaker.

 

The report cited Sutarto Alimoeso, a director general for food crops at the Agriculture Ministry, as saying population growth will likely outstrip the maximum food production of existing agricultural land by 2014, and the country needs to create about 200,000 hectares of agricultural land a year for the next five years to maintain food security.