July 7, 2009

 

Asia Grain Outlook on Monday: Prices may stay weak; bearish CBOT futures

 

 

Grains prices in Asia are likely to remain weak in coming days following a steep decline on bellwether Chicago Board of Trade futures Monday.

 

In Asian trading Monday, e-CBOT grains fell across the board as recent weakness in crude oil prices, which fell to a five-week low, along with firmness in the dollar and reports of favorable crop weather in key U.S. growing regions spurred selling. The market was closed Friday for a public holiday in the U.S.

 

Corn futures continued their decline - at 0719 GMT July corn was trading down 3.60 U.S. cents at US$3.42 a bushel, after hitting an intraday low of US$3.39 - and analysts said further downside now looks probable, despite generally supportive U.S. weekly export data Thursday.

 

Net U.S. corn export sales rose 68% from the previous week to 1.16 million tonnes for the week ended June 25 and gained 67% from the prior four-week average, the U.S. Department of Agriculture said in its Thursday report.

 

There were signs late last week that the recent slide in corn prices is fueling interest among Asian importers - South Korea's Major Feedmill Group purchased 55,000 tonnes of U.S. corn and South Korea's Feedmill Association also bought 55,000 tonnes of U.S.-origin corn late Friday - though traders said expectations that prices would move even lower in the near term are likely to damp further buying interest.

 

"(Our) corn price outlook has undergone a significant revision in June, following the USDA's new crop acreage updates," said Rabobank in a monthly commodities report Monday.

 

"2009-2010 fundamentals have shifted from a potentially bullish bias to a more neutral-to-bearish outlook, provided there are no major weather disruptions in the U.S. Demand parameters also remain weak at this stage of the economic recovery."

 

"Corn futures in July will trade on weather developments in the U.S., exchange rate movements and further macroeconomic developments, which are likely to guide speculative money flows," Rabobank said.

 

Rabobank also trimmed its forecast for Australia's 2009-10 wheat crop to 22.8 million tonnes from 23 million tonnes a month ago, and warned the impact from a likely El Nino climate episode could drive the number sharply lower.

 

While solid rainfall on wheat lands in June has boosted production prospects for the new crop, a key risk is an increased likelihood of an El Nino, which is usually but not always associated with below-average rainfall in southern Australia and can lead to severe yield penalties, Rabobank said.

 

Australian wheat output reached 21.4 million tonnes last crop year ended March 31.

 

Separately, India is to allow the export of 900,000 tonnes of wheat and 650,000 tonnes of wheat products up to March 31, 2010, a statement on the Web site of India's Directorate General of Foreign Trade said Friday.

 

India enforced a ban on wheat exports in 2007.