Asia Grain Outlook on Friday: Prices may fall, but imports likely to rise

 

 

Wheat and corn prices in Asia could find the upside potential limited in coming sessions, despite gains in China's corn prices this week and a rise in India's wheat futures.

 

Markets will likely continue to be heavily influenced by expectations of bumper corn and wheat harvests in the U.S., and the recent onset of rain in Australia is helping to soothe earlier concerns about the wheat crop there, traders said.

 

Any potential weakness in prices in coming weeks, however, will likely encourage Asian buyers to step up imports, as most have been buying on a hand-to-mouth basis while waiting for the new U.S. crops to bring prices down, traders said Friday.

 

Indian wheat futures rose to a four-month high Friday following a farm ministry proposal to hike the minimum support price and an increase in festival demand.

 

In China, corn prices continued to rise this week, supported by ongoing drought concerns and a recent increase in demand from the country's feedmeal industry, traders said.

 

Earlier this week, the China National Grain and Oils Information Center, a state-supported think-tank, cut its corn output estimate for this year by 1 million tonnes to 165.5 million tonnes, despite an increase in acreage forecast. The estimate implies a 0.3% decline in output from a year earlier.

 

Data issued Friday showed China's corn exports in August were little changed from a month earlier at 11,908 tonnes, although that is down 53% from the same month last year.

 

However, the relatively low volumes of corn that China exports means the news will have little impact on regional prices, traders said.

 

In Australia, the recent onset of rain has helped soothe concerns about the approaching wheat harvest.

 

In a monthly commodities report issued Friday, Rabobank said it has kept its forecast for Australian wheat production this year at 22.8 million tonnes intact, though "some regional adjustments have been undertaken to the forecast model, with upside in some regions effectively canceled by downside in others."

 

"Recent rainfall arrived just in time to prevent further downgrades to crop conditions, particularly in Queensland and New South Wales...with this rainfall the potential for an El Nino event appears to have been pushed aside for the moment," Rabobank said.

 

Rice Prices Supported by India Drought

 

Rice prices in Asia may continue to find support from drought-related crop reductions in India, with recent rains in the south of the country having now eased, said forecaster Meteorologix.

 

India's rice output will fall 7%-8% on year to 91 million-92 million metric tonnes in the fiscal year ending March 2010, from 99.15 million tonnes produced last year, Agriculture Minister Sharad Pawar said earlier this week.

 

Vietnam, meanwhile, will likely harvest 7.5 million metric tonnes of paddy from its summer-autumn rice harvest, which is 90% complete, while an existing rice stockpiling scheme will be expanded by 500,000 tonnes to around 1 million tonnes to try and help stabilize falling domestic prices, said Huynh Minh Hue, general secretary of Vietnam Food Association.

 

Under the scheme, a group of 21 exporters and trading firms will buy 500,000 tonnes of paddy directly from farmers at a fixed price of 3,800 dong a kilogram (US$0.21/kg), compared with the current market price of 3,400-4,000 dong/kg, he said.

 

In other rice news, Japan has resumed rice imports, buying 33,000 metric tonnes of Thai and U.S. rice in its first overseas purchases this fiscal year, a Japan Agriculture Ministry official said Friday.

 

Japan produces around 8.8 million tonnes of paddy annually and imports 767,000 tonnes every year as part of an international agreement. Last year Japan exported 137,000 tonnes of rice to undisclosed countries as part of a food aid program, he said.

 

Meanwhile, data released today showed China's soy imports rose 21% to 29.61 million tonnes on year, largely as expected. With imports forecast to rise in the coming months, the global market should continue to find support, though the focus will stay on the U.S. and South American producing countries, all of which are expected to see their production rise this year, traders said.

 

China's imports of soy are likely to increase in the November-December period to around 4 million metric tonnes each month, the China National Grain and Oils Information Center said in a report Thursday. In August, China imported 3.13 million tonnes of soy.