October 31, 2008
Asia Grain Outlook on Friday: Prices may fall on weak demand, economy
Grain prices are likely to fall in the week ahead as buyers sit on the sidelines amid general weakness in commodities and financial markets.
CBOT grain futures fell in Thursday's pit-trading after posting gains in the previous three sessions.
"The grain market is currently dysfunctional and not aiding in price discovery. Once the volatility quiets down, fundamentals will once again surface as true price determinants," said Nobuyuki Chino, president of grain trading firm Unipac Grains Ltd.
Given such volatility, Asian traders are waiting on the sidelines, unwilling to commit big orders, as they expect prices to fall more.
The world's biggest corn importer, Japan, for instance is taking it easy, with traders buying mostly hand-to-mouth.
Traders said Japanese grain buyers had got their fingers burnt buying expensive corn earlier this year, when they thought prices could rise even more, so they are being cautious and waiting to see how far prices fall.
Japanese traders have already bought 3.6 million metric tonnes of the 4.1 million tonnes of corn needed for the fourth quarter of 2008, but they haven't yet begun purchasing for the first quarter of 2009.
Traders expect buying to emerge only in late November, when traders will have no choice but to start importing in order to keep themselves well-stocked.
Such a wait-and-watch attitude is also being seen in the rice market. According to a report Thursday by the International Grains Council, buyers are hesitating to import rice in a falling market, which has resulted in a 21% fall in Thai export rice prices this month.
In deals this week, the Korea Feed Association bought 55,000 tonnes of U.S. corn at US$218.80/tonne on a cost and freight basis.
Meanwhile, Japan's Ministry of Agriculture is expected to buy a total of 96,000 tonnes of wheat from the U.S. and Canada in a tender to be concluded later Friday.
Last week, the ministry had canceled the wheat purchase tender for unspecified reasons.