August 12, 2009

Rice prices fell sharply on the bellwether Chicago Board of Trade in Asian trading Wednesday, having already fallen steeply overnight, with the market bracing itself for the release of key U.S. supply and demand reports due later today, traders said.

 

At 0356 GMT, e-CBOT's September rice contract was down 27.00 U.S. cents at US$13.45 a hundredweight, after falling 17.50 cents in U.S. trading Tuesday.

 

In the U.S., initial harvest reports from Louisiana and Texas have suggested outstanding yields though traders have noted much of the crop has yet to be harvested, particularly in Arkansas, the top producer, as it was planted late and might not yield as well.

 

In India, however, below-average rainfall is likely to curb crop output, including rice, in the coming months, observers said.

 

Rainfall from June to September is likely to be 13%-15% below the 50-year average and industry officials said a 15%-20% drop in rice output this year is likely, while the area under rice cultivation had fallen 25.5% as of July 30.

 

"The total drop in the area under cultivation until end-July is about 6%, which is really a large number," said Mridul Saggar, chief economist at Kotak Securities, a brokerage.

 

A number of India's rice-growing states have already declared drought; the latest to do so is Bihar, located in the east.

 

Meanwhile, the China National Grain and Oils Information Center, a state-supported think-tank, Wednesday increased its output estimates for the country's major crops, including rice, in 2009 from its previous report in July.

 

According to the latest CNGOIC report, China's 2009 rice output is likely to increase 1.4% on year to 193.5 million metric tonnes.

 

The CNGOIC also revised up its estimates for corn output by 3.5 million tonnes to 166.5 million tonnes, despite earlier adverse weather in the key northeast producing regions.

 

On e-CBOT Wednesday, corn futures were little changed from Tuesday's settlement. At 0348 GMT the September contract was down 0.60 cent at US$3.25 a bushel in thin trade, with observers attributing the lack of clear direction ahead of today's USDA reports as the main factor damping interest.

 

Wheat futures were also marginally lower in Asia, again with participants opting for the sidelines ahead of the USDA reports. At 0348 GMT the September contract was down 0.20 cent at US$4.85/bushel.

 

In India, the outlook for National Commodities and Derivatives Exchange wheat remains on the bearish side amid market talk the government may release 2 million tonnes of wheat this week, said a trader in New Delhi.

 

"There is little wheat left in the local market as most of the stocks are stuffed in state-owned granaries. Any delay in release beyond this week will lead to (a) price rise on festive demand," he said.

 

In other news, Japan's Ministry of Agriculture, Forestry and Fisheries won't hold its regular wheat tender this week, a ministry official said Tuesday, declining to give reasons.

 

The tender will likely be held next Tuesday, he added.