July 13, 2009

Grains prices may turn weaker following last week's generally bearish U.S. Department of Agriculture supply and demand report, though wheat futures bucked the trend to trade higher in electronic trading Monday in Asia on the Chicago Board of Trade.

 

The USDA in its July supply and demand report shaved 2009-10 world wheat production to 181.3 million tonnes from its June estimate of 182.7 million.

 

The tone of the report remained slightly bearish, as stocks are still at their highest levels since 2001-02, but this was largely expected and has already been factored into prices, observers said.

 

At 0700 GMT, e-CBOT's July wheat contract was trading up 7.50 U.S. cents at US$4.9925 a bushel, while rice, soy and corn turned mostly lower in thin volumes.

 

In Australia, widespread rainfall in June has boosted the outlook for wheat production this crop year, Rabobank Australia said in a report Monday, as it held unchanged from last month its output forecast of 22.8 million metric tonnes.

 

However, it warned of two key emerging risks to the crop, namely an increased chance of an El Nino weather episode and potential yield impacts from reduced use by farmers of fertilizer and crop chemicals, with producers being more risk averse in spending terms in the current economic climate.

 

"Currently the major focus for the Australian climate outlook is the potential for an El Nino event later in the year. The Bureau of Meteorology states that all international climate models predict the tropical Pacific Ocean will further warm and be above El Nino thresholds throughout most of the second half of 2009," Rabobank said.

 

The development of an El Nino weather episode is usually but not always associated with below-average rainfall in Australian wheat regions, which can have an adverse effect on crop development.

 

Wheat prices in China's major producing regions rose in the week to Monday, with farmers in some producing areas still holding onto stocks in the hope of better prices, while wheat futures on the National Commodities and Derivatives Exchange of India also rose amid concerns that less rainfall could lead to lower output of grains, market observers said.

 

In other regional grains news, South Korea's Major Feedmill Group purchased 110,000 metric tonnes of corn in a tender concluded late Friday, a trader with the company said Monday.

 

The first cargo of 55,000 tonnes was purchased at US$210.87/tonne from Cargill and will arrive Jan. 15. The second 55,000 tonne cargo of optional origin will arrive Jan. 25 and was purchased at US$207.97/tonne, the trader said.

 

Meanwhile, India's federal government is not planning to lift a ban on exports of non-basmati rice anytime soon, junior trade and industry minister Jyotiraditya Scindia told the lower house of Parliament Monday.

 

Last week, federal agriculture minister Sharad Pawar told reporters the government will review the export ban in August after assessing rains and the crop's condition.

 

India banned rice exports in 2008 to try to rein in inflation and safeguard domestic supply.