October 13, 2008

 

Asia Grain Outlook on Monday: Downside bias remains; focus on economic woes

   

 

Asian grain prices remain biased to further downside in coming days though the speed of the decline will likely slow down following last week's tumble, Asia-based traders and analysts said Monday.

 

Chicago Board of Trade grains and oilseeds contracts were hammered down last week as ongoing global economic turmoil, and a bearish U.S. Department of Agriculture report Friday, sparked widespread long liquidation.

 

The bearish trend remains but there's some room now for a technical rebound following last week's selling, though the upside potential is weak and the market will continue taking cues from the wider economic picture, analysts said.

 

Friday, CBOT soybean futures fell by the daily 70 cent trading limit, with the November contract settling at US$9.10 a bushel as the USDA reported 2008-09 soybean production at 2.983 billion bushels, up 49 million bushels from the September estimate of 2.934 billion bushels. The average of analysts' estimates anticipated a crop size of 2.920 billion bushels.

 

Likely adding to the bearish mood in Asia in coming days is increasing arrivals onto India's spot markets as the main soybean harvest gets underway. Previous estimates suggest India will experience a bumper harvest this year, possibly exceeding 10 million tonnes. The recent onset of drier, warmer weather in the country's main producing regions is also favorable for early harvesting, market observers said.

 

In China, soybean imports during the first nine months of the year rose 32% on year to 28.70 million tonnes, while imports in September 2008 more than doubled compared to last year to 4.14 million tonnes, according to preliminary data issued by the General Administration of Customs Monday.

 

CBOT wheat contracts also fell sharply last week, with the December contract down 41.25 cents Friday at US$5.635/bushel, a 12% fall on week.

 

The global wheat production forecast for 2008-09 may touch 680.2 million metric tonnes, according to Friday's USDA report.

 

Meanwhile, a production forecast for an Australian wheat crop to be harvested by year end was trimmed Monday to 20.5 million metric tonnes, down from 21.0 million tonnes a month ago, Rabobank Australia forecast.

 

Production expectations were cut following frost in Western Australia's wheat belt and ongoing dry conditions in Victoria, parts of South Australia and southern New South Wales, Rabobank reported in a monthly agribusiness review.

 

CBOT corn also finished last week sharply lower, with the December contract down 30 cents at US$4.08 1/4 per bushel and may fall further still, with a test of US$3.50/bushel possible, market observers said.

 

In other news, China has harvested almost 80% of its autumn grain crop, including 90% of its corn and soybean crop and more than 80% of its rice crop. The country is on track to see the fifth annual grain output growth in a row, said the Ministry of Agriculture over the weekend.

 

The country's grain output in 2007 totaled 501.5 million tonnes, producing just about enough to meet its requirement.

 

Markets and businesses in Japan were closed Monday for a public holiday.