August 14, 2009

 

Grains prices were mostly weaker in thin volume in Asian trading Friday, with the market continuing to focus on generally bearish supply fundamentals following this week's U.S. Department of Agriculture August crop reports, traders said.

 

At 0620 GMT, e-CBOT's August soy contract was trading sharply lower, down 47.25 U.S. cents at US$11.40, having fallen by 28.75 cents in the U.S. overnight, amid a general lack of supportive factors.

 

Weather forecasts in the U.S. pointing to benign near-term conditions for developing crops, coupled with technical pressure, served as warning signs to bullish traders that the market may be running out of upside steam, traders said.

 

Wednesday's USDA crop report pegged U.S. soy production at record levels, though estimations that U.S. output in 2009 may reach 3.199 billion bushels with a yield of 41.7 bushels per acre was below the average Dow Jones survey estimate of 3.213 billion, on an average yield estimate of 42.1 bushels/acre.

 

August is when soy enter their pollination stage, and that is when U.S. crop yields are set.

 

However, weather will play a significant part in determining final yield and production. Soy in the eastern Midwest in particular are vulnerable to crop losses from normal fall frosts due to lagging maturity brought about by late planting.

 

In China, the outlook for soy has also turned weaker following a slight decline Thursday that was triggered by funds selling soy contracts to switch to corn, amid expectations that corn production will be hit by drought in key growing areas in the northeast of the country.

 

Analysts said soy futures will also suffer from selling pressure if prices rise above RMB3,850/tonne, as that would give the government an opportunity to sell soy from its reserves at prices above the base auction price of RMB3,750/tonne.

 

CBOT corn futures also declined slightly Friday - at 0605 GMT on the e-CBOT, the September corn contract was down 0.50 U.S. cent at US$3.24/bushel - having fallen 6.25 cents during U.S. trading hours Thursday.

 

Traders attributed corn's fall to bearish crop fundamentals, with Wednesday's USDA report estimating the U.S. 2009 corn yield at a near record 159.5 bushels per acre.

 

Weather in key U.S. growing areas remains benign and is mostly seen as bearish, traders said.

 

Recent hot weather is dissipating, and the crop is getting enough rainfall in most areas. Some traders say that if the weather remains favorable, corn will ultimately break below the psychologically-important US$3.00/bushel support level.

 

In other news, the world's largest rice exporter, Thailand, will hold talks with Cambodia about forming a rice council, as part of an initiative to establish a single market for members of the Association of Southeast Asian Nations, Thai Commerce Minister Pornthiva Nakasai said Friday.

 

"It's a good opportunity for Asean members to jointly collaborate on (rice) production. This will benefit us on pricing and bargaining power," Pornthiva told reporters on the sideline of the 41st Asean Economic Ministers meeting in Bangkok.