July 27, 2009

Grains were mixed in thin, rangebound trade Monday, but rice and wheat prices in Asia may find support in coming sessions amid mounting concern that the sluggish start to India's monsoon season could hit the country's crop output in the weeks and months ahead.

Bellwether Chicago Board of Trade futures mostly fell Friday, with wheat, corn and soy all ending the day lower.

Rice futures rose, however, with CBOT's September rice contract ending the session up 3.50 U.S. cents at US$13.41 a hundredweight.

At 0647 GMT in Asian trading Monday, e-CBOT rice was up 2.00 cents as the market continued to focus on weak India monsoons and tight supply in the U.S., with the market largely ignoring reports that the world's biggest rice exporter, Thailand, is set to start releasing reserves from its stockpile of 6 million-7 million tonnes amid favorable prices.

Traders had previously expressed concerns that Thailand could create a glut in the market when it began to release the reserves, though the government said late last week it will only release 500,000 tonnes of milled rice initially.

In India, after the driest June in 83 years, four of the country's 28 provinces have declared drought. Rainfall between June 1 and July 22 was 18% below normal, with northern and northwestern regions hit worst.

The June-September monsoon is critical for India's summer-sown crops, including oilseeds, rice, and sugar cane, as 60% of fields are rain-fed. If rainfall remains sporadic through September, winter crop yields, such as wheat, could also be hurt, analysts said.

Meanwhile, the outlook for CBOT corn futures appears to have turned weaker following Friday's decline, traders said.

On e-CBOT Monday, the September corn contract was trading down 2.20 cents at US$3.14 a bushel, extending Friday's 10.75-cent decline, with traders attributing the recent fall to cooler weather and adequate rainfall in the U.S. corn growing belt, which is prompting expectations of good yields.