Asia Grain Outlook on Wednesday: Prices mostly firm; markets focus on weather

 

 

Cash grain prices in Asia will likely stay mostly firm in the coming days, with producers and consumers alike continuing to monitor drought-related crop damage in some countries along with the lingering prospect of an El Nino weather situation.

 

Drought in China's northeast corn growing provinces is expected to cut corn output by around 15 million metric tonnes and has helped push prices to levels above the government's weekly auction price. Last year, China produced 165.9 million tonnes of corn.

 

Expectations of lower output have helped underpin prices and also helped boost auction sales to 1.92 million tonnes or 77% of the 2.5 million tonnes planned - the highest level since the auctions began in July.

 

China's corn prices, which rose in the week to Wednesday in Harbin and Heilongjiang provinces, were around RMB1,580/tonne, up from RMB1,550/tonne a week ago, and are likely to stay firm with feedmill demand likely to rise ahead of holidays in the country, a time processors usually top up their stocks, traders said.

 

China's soy sales remain sluggish, however, with traders opting for the sidelines amid sentiment the government is working on a program to provide subsidies to soy crushers, participants said.

 

In Australia, wheat output could fall to around 20 million to 21 million tonnes, down from estimates last week of 22 million to 23 million tonnes, though production could still go either way depending on rainfall, analysts said.

 

Australia's wheat output in the last crop year ended March 31, 2009, was 21.4 million tonnes.

 

Meanwhile, rice prices in Asia are likely to stay firm in the near term, despite already high stockpiles in Thailand and Vietnam - the world's largest and second largest exporters - and expected bumper crops when the main harvest gets underway in November.

 

"The whole situation surrounding India's drought is good news for other (rice) exporters. Thai rice exports to Africa alone have doubled in recent weeks to 400,000 tonnes a month and will likely stay at that level until the end of the year," said Chookiat Ophaswongse, president of the Rice Exporters Association of Thailand.

 

Thai 5% white rice is currently being offered around US$580/tonne.

 

"If demand stays as it is, I don't expect (Thai) white rice prices to fall below US$500/tonne even when the main harvest gets underway in November. Prices could even rise to US$700/tonne," said Vichai Sriprasert, president of Bangkok-based Riceland International Co.

 

The drought in India is expected to cut summer-sown rice output by around 10 million tonnes and has enabled both Thailand and Vietnam to step up exports to countries India normally supplies.

 

Until an export ban was imposed in 2008 amid supply worries and rising prices then, India had been the world's second largest rice exporter.

 

Late rains in August have helped resume sowing in India's Uttar Pradesh state, but rice production from the summer-sown crop this year could be less than half of what was produced last year as farmers are nearly 45 days behind schedule in planting.

 

Still, despite the generally bullish outlook for grain prices in Asia, Chicago Board of Trade futures were weaker in thin volumes in Asian trading Wednesday.

 

"CBOT wheat and corn futures particularly continue to be dragged down by expectations for good crops in the U.S. and generally sluggish global demand," said Koname Gokon, a commodities analyst with Okato Shoji Co.

 

At 0911 GMT, e-CBOT's September corn contract was trading 1.40 cents lower at US$3.10/bushel, while September wheat was down 1.60 cents at US$4.57/bushel.