June 28, 2012

 

Asia grain prices up on predictions of low supply due to weather

 

 

Anticipated impact of poor weather on US crops is expected to boosted Asian corn and wheat prices this week, traders said.

 

The July corn contract on the Chicago Board of Trade climbed 2.4% to US$6.46 a bushel Tuesday (June 26) while "new-crop" December corn rose 5.1% to US$6.24 a bushel as expectations of limited rain in the US Midwest in coming weeks heightened fears of crop losses.

 

The US corn crop is entering the key pollinating and yield-setting period so forecasts of continued dry weather have created big concerns about yields, likely pushing new-crop contracts higher in the coming sessions, Barclays Capital said in a research note Tuesday.

 

The US Department of Agriculture said Monday (June 25) that as of Sunday (June 24) around 56% of the country's corn crop was in good-to-excellent condition, down from 63% a week earlier.

 

The ratings were the worst in years at this point in the growing season and were bullish for corn prices, a Singapore-based trader said.

 

Wheat futures also ended higher Tuesday, tracking corn, traders said.

 

CBOT September wheat rose six cents to US$7.474 a bushel Tuesday; Kansas City Board of Trade September wheat climbed 2 1/2 cents to US$7.51 ½ a bushel; and the September wheat contract on the Minneapolis Grain Exchange settled up 10 1/2 cents at US$8.26 ½ a bushel.

 

Corn has been in strong demand from importers and ethanol producers, Societe Generale said in a research note Wednesday (June 27). Tight supplies led to competing bids at high cash prices, it said, adding that inventories will likely be drawn down further.

 

"Similarly, we expect to see an on-year decline in wheat inventories owing to both strong export demand and expectations of strong March-May wheat feeding to livestock," it said.

 

Unusually dry weather in Russia, one of the world's largest wheat-producing regions, will also likely underpin prices, a second Singapore-based trader said.

 

Russia's agriculture ministry said Monday that it expects the country's 2012 grain harvest including wheat to fall to 85 million tonnes from 94.2 million tonnes in 2011 because of unfavourable weather.

 

Most grain market participants will be less interested in a key euro-zone summit meeting starting Thursday (June 28) than weather risks, traders said.

 

Spot trade has been slow in Asia, with no tenders in South Korea and Taiwan last week and so far this week because of high prices, they said.