Asia Grain Outlook on Monday: Prices may fall; ample stocks, good harvest

 

 

Grain prices in Asia are likely to trade lower in coming sessions, weighed down by Friday's bearish U.S. Department of Agriculture supply and demand report and reports that South Australia's wheat production this crop year could match previous record levels.

 

Meanwhile, a statement published over the weekend by China's State Administration of Grain showing state-owned enterprises held 225.4 million metric tonnes of raw grain stocks as of end-March and saying the country is likely heading for a bumper autumn harvest despite a severe drought earlier in the year could also weigh on prices, participants said.

 

According to another monthly USDA report issued Friday, China's overall corn output this year is estimated at 155 million tonnes, down 5 million tonnes or 3% from last month and down 10.9 million tonnes from last year's record crop.

 

However, China's planted area is estimated at 30 million hectares, up 0.2 million hectares from last year's revised area of 29.8 million hectares, as farmers reportedly shifted from soy to corn in 2009 in response to higher relative profits, the USDA said.

 

South Australia's wheat production this crop year could match a record 4.8 million tonnes set in 2001-02 amid generally favorable weather, said Peter Fulwood, a crop consultant to the state's Primary Industries department.

 

Most wheat crops in the state have enough available soil moisture to take them through to a harvest that gets underway in earnest in November, after widespread rains in early October built on falls in September, mostly in a range 50 to 100 millimeters, he said.

 

The soft finish to the growing season through mostly moderate temperatures is also helping grain mature, with crops near harvest actually needing a burst of warm to hot weather to finish ripening, Fulwood said.

 

"There's going to be a lot of wheat around," though whether the crop is a record remains to be seen, he said.

 

Meanwhile, the USDA in its October supply and demand report issued Friday hiked its estimate for U.S. 2009-10 U.S. wheat ending stocks to a nine-year high of 864 million bushels from its September estimate of 734 million.

 

The weak fundamental situation for wheat is well known and bearishness about large global supplies has hung over the market for weeks, but news of huge stockpiles and expectations the U.S. is heading for a bumper wheat crop this year will likely continue holding prices down in the weeks ahead, participants said.

 

In other regional grain news, The Philippines said Monday it will hold a tender Oct. 30 to buy up to 250,000 tonnes of rice, which could be a prelude to rice deals involving larger quantities.

 

A trader with an international trading house said the tender, as it doesn't involve a large quantity, could be an exercise to determine which way prices are heading.

 

"Any rice deal (with Vietnam) may be finalized after the tender. I think this is for price direction," the trader said.

 

Last year, the Philippines signed an agreement with Vietnam for the supply of up to 1.5 million tonnes of rice a year for the three years starting 2008.

 

According to a recent assessment by the Agriculture Ministry, the Philippine farm sector likely incurred storm damage of around PHP7.94 billion ($170 million) in the wake of typhoons Ketsana and Parma, with rice fields the worst hit, with initial production losses estimated at more than 375,000 tonnes.

 

Meanwhile, the outlook for India's agriculture production is getting increasingly bleak this year after heavy rains and flooding in southern India caused widespread damage to summer crops, including rice and corn.

 

Close on the heels of a drought earlier this year that hit crops across the country, the latest development could fuel a rally in agriculture prices despite India having ample stocks of essential grains.

 

"Prices of agro-commodities are likely to rise in the next month as there has been some damage to crops such as rice, corn and some varieties of spices and pulses," said Ajeet Kumar, a Delhi-based analyst with SMC Global Securities Pvt Ltd.

 

According to Federal Farm Commissioner N.B. Singh, recent flooding has hit more than 300,000 hectares of farmland planted with crops, including oilseeds, pulses, rice and corn.