December 18, 2006

 

Asia Grain Outlook on Monday: Wheat premiums may rise on US exports

  

 

Premiums of wheat delivered to Asia may rise in the week ahead, as U.S. wheat exports continue to be robust.

 

Premiums for corn and soybeans may, however, fall a bit over the week as some long liquidation may emerge in Chicago Board of Trade futures as the year-end approaches. But strong demand for both commodities is likely to provide support for prices.

 

Traders in Singapore said the grains market in Asia is likely to remain quiet until the end of the year as high international prices discourage buyers from importing grains aggressively.

 

A trader at a Singapore broking firm added that corn demand has especially taken a hit in Indonesia, where ample stocks have led to many traders selling off corn, triggering a fall in Indonesian corn prices.

 

Among major deals over the past few days, the Taiwan Flour Millers Association bought 48,080 metric tonnes of U.S. No. 1 wheat from trading house Columbia Grain Friday.

 

While it paid US$218.83 a tonne for Dark Northern Spring grade wheat, Western Wheat cost US$187.92/tonne.

 

Japan's Ministry of Agriculture, Forestry and Fisheries bought a total of 147,000 tonnes of U.S., Canadian and Australian wheat Thursday.

 

In the corn market, no major deals were reported in Asia over the past few days, as higher prices continued to discourage buyers from stepping up demand.

 

There were also no major deals reported for soybeans. Taiwan's Breakfast Soybean Procurement Association rejected all bids in its tender to purchase 60,000 tonnes of U.S. or South American soybeans last Wednesday.

 

From a long-term price perspective, traders and analysts said grains prices may continue to rise in 2007 for buyers in Asia, driven by fears of output lagging demand.

 

High global prices typically lead to a strong supply response within a year, but this is possible only if the rally is limited to one commodity at a time, analysts said.

 

However, analysts added that since most global grain markets have been in deficit for some years, it will be difficult to restore surpluses when soybeans, corn and wheat are all in short supply.

  

India '07 wheat output may rise to 74 million tonnes

  

In other news, India, one of the biggest wheat importers in 2006 so far, has reported good progress in its sowing of its wheat crop, which began in November.

 

Wheat plantings so far since October covered 23.25 million hectares, up from 21.06 million hectares a year earlier, according to data provided by the Ministry of Agriculture.

 

Harvesting will begin next month.

 

If India decides to import or export wheat next year, planting progress is one of the main factors on which the country's 2007 wheat trade will depend on.

 

India's Agriculture Minister Sharad Pawar last week said that wheat output could reach 74 million tonnes in 2007, up from an estimated 69.48 million tonnes this year, if the weather continues to be favorable.

 

Meanwhile, China's Ministry of Agriculture said over the weekend that the government supports the development of biofuel but doesn't support using corn or any other grain crops as raw material to produce it, the China Daily newspaper reported.

 

"We have a principle with regard to biofuel: it should neither be at the cost of foodgrains for people's consumption nor should it compete with grain crops for cultivated land," Yang Jian, director of the agriculture ministry's development planning department, was quoted as saying.