Asia Grain Outlook on Wednesday: Wheat price outlook weak; big Global stocks

 

 

Wheat prices will likely remain under pressure in the weeks ahead, despite reports that the Philippines may buy an additional 400,000 metric tonnes, having already purchased around 200,000 tonnes since two powerful typhoons struck the country in late September and early October.

 

Though an increase in imports to the Philippines may provide some price support, any gains will likely be short-lived, with ample global stocks likely to drag on sentiment, market observers said Wednesday.

 

"Lingering bearish fundamentals will make it difficult for any rally in (wheat) prices to be sustained in the medium term. The global stock to use (ratio) is expected to be near 30% in 2009-10...and the slow pace of U.S. wheat exports is expected to constrain prices," Commonwealth Bank said Wednesday in a commodities outlook report.

 

Philippine feed millers are seeking to buy 45,000 tonnes of wheat and 10,000 tonnes of corn in a tender scheduled Wednesday, with possible origins including the Ukraine and Russia, traders said.

 

The Philippines imported around 1.3 million tonnes of wheat from November last year to June, when local corn prices soared to record levels following typhoon damage.

 

In India, meanwhile, wheat output in the current fiscal year that began April 1 will likely rise by 2 million tonnes due to an increase in the area under cultivation, the federal farm minister said Wednesday.

 

The area under wheat will likely rise by 500,000 hectares this year, Sharad Pawar said at a conference. India produced 80.58 million tonnes of wheat last year, according to government data.

 

On the bellwether Chicago Board of Trade, wheat futures were higher in Asian trading Wednesday--at 0700 GMT e-CBOT's December contract was up 2.40 cents at US$5.18/bushel--after declining by 1.00 cent in the U.S. overnight, though traders said the overall outlook continues to lean toward the bearish side.

 

Wheat was "showing its true colors" by trailing corn and soy, as fundamentals aren't supportive for wheat, a CBOT floor trader said Tuesday.

 

"You've got to point to the world stocks," an analyst said. "We're wallowing in it."

 

In other grain news, India's government hasn't decided on the quantity of rice it plans to import this marketing year, said Agriculture Minister Sharad Pawar.

 

The country's summer-sown rice output is expected to be 69.45 million tonnes in the year that began Oct. 1, down from 84.58 million tonnes in 2008-09, according to the government's first advance summer crop estimate.

 

India will likely purchase 26 million tonnes of rice from farmers in the 2009-10 marketing season that began Oct. 1, Pawar said.

 

However, previous reports suggest the country may import a total of two million tonnes of rice over the next 12 months in phases to meet a possible shortfall following a drought earlier in the year.

 

The imports will start only if a senior group of ministers approves the proposal, put forth by the food ministry, at a meeting scheduled Nov. 12, according to a food ministry document seen by Dow Jones Newswires Tuesday.

 

Three state-run companies--State Trading Corp. (512531.BY), MMTC Ltd. (513377.BY) and PEC Ltd.--issued import tenders for 10,000 tonnes each over Friday and Saturday, but it wasn't immediately clear whether these were over and above the planned two million tonnes of imports.

 

India, the world's second largest rice producer, is mainly looking at Vietnam, Thailand and Cambodia for the imports.