Asia Grain Outlook on Wednesday: CBOT wheat hits 6-mo high; fundamentals weak

 

 

Wheat prices on the bellwether Chicago Board of Trade climbed to six-month highs Tuesday on technical buying by funds after the benchmark December contract snapped its 200-day moving average--a scenario that could help support Asian wheat prices in coming sessions.

 

However, the overall fundamental outlook for wheat remains bearish due to high global stocks and sluggish demand for U.S. wheat, due primarily to high prices, participants said Wednesday.

 

CBOT's December contract closed Tuesday up 12.50 cents at US$5.7475 a bushel, it's highest since Aug. 3, though profit-taking emerged in Asian trading Wednesday.

 

At 0322 GMT, CBOT December corn was at US$5.71/bushel in electronic trading.

 

In Australia, a recent hot spell in the southeast of the country could limit the potential of some winter crops, including wheat, participants said Tuesday.

 

While the extent of the damage wasn't known yet to storage and handling concern GrainCorp Ltd. (GNC.AU), the hot weather could cause a loss of grain weight in maturing cereals, Corporate Affairs Manager David Ginns said in a brief interview.

 

The hot dry spell in southwest districts in Victoria state that began in October has lowered the potential of crops, especially later maturing ones such as winter wheat, according to a crop industry newsletter issued Tuesday by Victoria's Department of Primary Industries.

 

Recent forecasts project Australia's wheat output in the current crop year to March 31 at 22 million-23 million metric tonnes.

 

Meanwhile, Japan's Ministry of Agriculture, Forestry and Fisheries said Tuesday it is seeking 92,000 metric tonnes of U.S.-, Canadian- and Australian-origin wheat in a tender to be concluded Thursday.

 

CBOT soy futures also rallied Tuesday. The January contract ended up 19.50 cents at US$10.2950, despite a firmer U.S. dollar, as the market continued to focus on solid demand and worries about possible field losses from the remaining unharvested crops due to heavy rains in some parts of the U.S. Midwest, participants said.

 

In China, soy futures were little changed Tuesday after profit-taking pared earlier gains.

 

Analysts said supply-demand fundamentals can't support a sharp rise in futures as the U.S. soy harvest is nearing an end, while drought in Argentina will likely ease with expected rainfall next week.

 

The Chinese government, meanwhile, is expected to purchase new soy at CNY3,740/tonne, based on recent market talk, higher than last year's CNY3,700/tonne--but the quality bar will be set higher than last year. If the talk pans out, it would mean many farmers won't get the prices they have been holding out for.

 

Market expectations previously put the government price around CNY3,750/tonne, and the new talk hasn't helped market sentiment, said Gao Yunyue, an analyst with Zhejiang Dadi Futures Brokerage.

 

In other regional grain news, rice prices continue to rise, supported by bullish import expectations following adverse weather in India and the Philippines.

 

In Thailand, the world's biggest rice exporter, 25%-broken white rice was being offered around US$431/tonne on a free-on-board basis this week, compared with around US$429/tonne last week.

 

Philippine rice imports in 2010 could hit a record 2.5 million metric tonnes due to lower output following extensive typhoon damage, an official of the Philippine agriculture department said Tuesday. The country imported 1.775 million tonnes in 2009 and a record of 2.3 million tonnes last year.

 

Meanwhile, India plans to import rice through a government-to-government procurement channel, Commerce and Industry Minister Anand Sharma said Tuesday.

 

"We're talking to the Thai and Vietnamese governments (about purchasing rice)," Sharma said at a meeting with state ministers.

 

"Efforts are on to secure rice. We are looking at all options," he said.