August 17, 2009

 

Asia Grain Outlook on Monday: Corn, wheat may stay weak; supply concerns

 

 

Grains prices in Asia are likely to continue leaning towards the bearish side in coming sessions due to weakness in Chicago Board of Trade futures as favorable weather in the U.S. fuels expectations of ample harvests.

 

In Asian trading Monday, e-CBOT futures were mostly lower across the board, with rice contracts the only exception. As of 0620 GMT, September rice was up 23.50 U.S. cents at US$13.5350 per hundredweight on technical buying following steep declines last week.

 

Despite a generally firm outlook for rice going forward - due mainly to below-average monsoon rains in India - traders said wheat and corn futures will likely remain weak in coming sessions.

 

The September corn contract was down 4.00 U.S. cents on e-CBOT at US$3.1525/bushel.

 

"The big focus for corn now is on U.S. weather," said Okato Shoji Co. deputy research manager Koname Gokon.

 

"There are general expectations that the U.S. crop is going to be big this year, barring the onset of an early frost. I think at best we are going to see sideways corn trading with a bias to the downside; a test of US$300/bushel looks probable," he said.

 

Corn futures are also susceptible to crude oil price weakness, a key focus point in the days ahead, he said.

 

Traders have previously said that the U.S. Department of Agriculture is already projecting a large crop with a yield of 159.5 bushels per acre, and they expect the government to increase that estimate unless weather becomes a problem.

 

CBOT wheat contracts also declined Monday. The September wheat contract was down 2.75 cents on e-CBOT at US$4.7900/bushel, again with traders expecting sideways to weaker trade in coming sessions following last week's U.S. Department of Agriculture production report, which raised estimates for U.S. production and confirmed perceptions of ample global supplies.

 

In Australia, bearish fundamentals have also encouraged forecasters to revise down projected prices.

 

Late Friday, Agribusiness AWB Ltd. (AWB.AU) cut its estimated pool return on benchmark 2009-10 Australian Premium White grade wheat by AUS$25 per tonne to a range of AUS$265-AUS$275 per tonne, citing increasing world supply and falling demand.

 

"When there is so much supply, the buyers hang back and only commit for their immediate needs, hoping for lower prices next time. It's a spiral that continues until there is a shock to break it," Stuart Richardson, a spokesman for AWB's Australian commodity management unit, said in a statement.

 

Most official and private forecasts for Australian wheat production the current year ending March 31, 2010, are in a range of 22 million to 23 million tonnes, compared with an actual 21.4 million tonnes in the last crop year.