August 1, 2007

 

Asia Grain Outlook on Wednesday: Corn, soybean may gain on US weather

 

 

Asian buyers negotiating import deals for corn and soybean may have to pay higher prices over the rest of the week, on expected gains in Chicago Board of Trade futures and higher ocean freight cost.

 

CBOT futures now are focused on the weather in U.S. Midwest, where most of corn and soybean is grown. Weather forecasts indicate dry conditions in Midwest over the next several days, which could hurt the planting of both these crops.

 

The weather is particularly critical for soybean, since acreage planted with the crop is expected to be much lower in the U.S. than last year as farmers have switched to growing corn. Continued dry weather in the Midwest could lead to sharp price gains in soybeans.

 

Meantime, Asian buyers said ocean freight costs remain high, which is keeping some traders on the sidelines.

 

In Asia's largest corn-buying nation, Japan, the U.S. Gulf-Japan panamax freight cost is US$95/tonne, with traders expecting more gains in coming days.

 

"I don't expect any significant rise in corn volumes purchased by Japanese traders in coming months, as ocean freight costs are expected to stay high," said a trader in a Tokyo broking firm.

 

Despite the high freight costs, Japan's Ministry of Agriculture is expected to buy 146,000 tonnes wheat from U.S., Australia and Canada in a tender to be concluded on Thursday, for September and October delivery.

 

In other news, India is headed for a good summer-sown oilseed harvest, which is expected to be around 15 million tonnes, up 15.4% on year.

 

Higher oilseeds output in India is likely to be bearish for edible oil prices globally as India is one of the world's largest edible oils importers. "We are keeping our fingers crossed. If monsoon rains remain normal in the next several weeks, we are headed for a good crop," said B.V. Mehta, executive director of industry lobby group Solvent Extractors Association of India. India's summer-sown oilseeds crops, which include soybean, peanut, sunflower, sesame and castorseed, are sown from June to August and harvesting begins in late September.

 

Annual June-September monsoon rains are the major source of water for these crops.