October 6, 2008

 

Asia Grain Outlook on Monday: Market sentiment weak on global economic woes
  

 

Spillover from the current global financial market turmoil will likely continue to pressure Asian grain prices, which have become significantly weaker in recent sessions, in the week ahead.

 

Chicago Board of Trade grain contracts sank to 10- to 17-month lows last week, and further losses are highly likely in coming days, Asia-based traders and analysts said Monday.

 

"Fundamentally, the outlook is bad, and on top of that there are concerns about a serious impending recession," said a Tokyo-based grains analyst.

 

"We're seeing a flight away from commodities in general, and right now it's hard to see where that is going to stop," he said.

 

CBOT soybean futures surrendered early gains Friday, with the benchmark November contract ending the day 49 U.S. cents lower, at US$9.92 a bushel - the lowest level in 11-months - as funds liquidated positions amid continued global economic uncertainty. Further losses are likely as the U.S. harvest gets underway, and a test of US$8.50/bushel support is likely early this week, the analyst said.

 

The bearish mood continued in Asia Monday with China's soybean and soy product futures on the Dalian Commodity Exchange hitting the 5% daily lower limit in early trade, with China-based market observers citing CBOT's decline Friday and lingering concerns surrounding the state of the U.S. economy for the fall.

 

Rice prices bucked the generally bearish trend to settle higher Friday. CBOT November rice rallied by the 50-cent daily trading limit to settle at US$18.34 1/2 per hundredweight on commercial buying amid oversold conditions after falling sharply for a week, a U.S.-based trader said.

 

Thailand's government plans to sell 6 million tonnes of unmilled rice from stockpiles in coming months, The Bangkok Post reported Monday.

 

Thai rice prices were expected to stay around the current US$700 per tonne for some time, though downward pressure may increase if the government sells the rice in big lots, the report cited C.P Intertrade President Sumeth Laomoraphorn as saying.

 

The sales will be made in government-to-government deals. Selling prices have yet to be finalized, but the ministry said they would be based on average costs of old and new rice, foreign-exchange rates and prices of grains from other countries, the report said.

 

Friday, CBOT corn futures ended the day little changed, with the December contract flat, at US$4.54/bushel, though another Tokyo-based grains analyst said he expects December corn to test US$3.50/bushel support early this week due to weak fundamentals and continuing concerns about an impending global recession.

 

CBOT wheat futures ended Friday mostly higher, though profit-taking pared early gains, traders said.

 

The December wheat contract ended 4 1/4 cents higher, at US$6.40 1/4 a bushel.

 

This week, wheat traders will likely turn to weather reports in soft, red wheat-growing areas of the U.S. eastern Midwest. Winter wheat seeding is now underway but has been delayed in some areas due to the slow soybean harvest, traders said.