Asia Grain Outlook on Monday: Regional prices firm; Global stocks ample

 

 

Grain prices in Asia will likely stay firm in the coming days amid continued concerns about drought in some of the region's biggest producers, although importers should find some reprieve going forward from weak global prices and expectations of bumper U.S. corn and wheat harvests, traders said Monday.

 

In China, wheat prices continued to rise in the week to Monday amid forecasts corn production could be around 20 million tonnes lower this year due to drought in the northeast.

 

Corn prices tend to influence wheat prices as one can be substituted for the other in manufacturing animal feed, traders said.

 

In Dezhou in China's Shandong province, wheat prices were around RMB1,950 a metric tonne Monday, compared with RMB1,910-RMB1,920/tonne a week ago, while in Zhengzhou in Henan province wheat was RMB1,940/tonne, compared with RMB1,920/tonne a week ago.

 

The recent drought-related spike in China's corn prices has now led to an increase in the import of Distillers' Dried Grains with Solubles, a corn ethanol byproduct used in manufacturing animal feed, analysts said.

 

China has so far imported around 150,000 tonnes of DDGS from the U.S. this year and it could reach 200,000 tonnes by the end of the year - from just 6,740 tonnes in 2008 - as a result of rising domestic corn prices, said Li Qiang, general manager of Shanghai-based JC Intelligence Co.

 

"The rise in DDGS imports from the U.S. is mainly because of the price advantage; China's domestic corn price is currently higher than in the U.S."

 

A higher demand for animal feed tracking a recovery in the livestock farming industry is also behind the recent increase in imports, Li said.

 

Meanwhile, in South Australia, the wheat crop has now received average to above average rainfall in most districts and the region's 2009-10 wheat crop is expected to total 3.304 million tonnes, up slightly from the June forecast, South Australia's primary industries and resources department said Monday.

 

Crops in Western Australia are also growing well and wheat production in the 2009 crop year is estimated at 7.5 million-9 million tonnes, according to the state's department of agriculture and food.

 

Still, Australia's overall wheat crop could fall slightly this year due to the lack of rain, with analysts pegging overall production in a 18 million tonnes-21 million tonnes range, compared with an actual harvest of 21.4 million tonnes last year.

 

Despite expectations of drought-related crop reductions in Asia, the overall global supply and demand situation remains evenly balanced, traders said.

 

"There are forecasts that Australia's wheat production may fall slightly this year, but any shortfall will likely be offset by a bumper crop in the U.S.," said Sumitomo commodities analyst Genichiro Higaki.

 

"Japan and South Korea are quite big importers of Australian wheat, but they can easily increase purchases from the U.S. and Canada if they need to or if the price is more favorable," he added.