January 22, 2007

 

Asia Grain Outlook on Monday: Premiums struggle to find direction

  

 

Premiums for grains delivered to Asia may swing either way in the week ahead, in the absence of strong fundamental factors to drive the wheat, corn and soybeans markets.

 

However, on a longer-term perspective, Commonwealth Bank of Australia commodities strategist Tobin Gorey said bullishness will rule the grains market in 2007, led primarily by strong gains in corn prices, as it becomes a major feedstock for ethanol production globally.

 

According to Gorey, a "turf war" has broken out among grains, as last year's sky high prices for wheat and corn, and in a smaller way for soybeans and barley, make it tough for farmers to decide which crop to sow this year.

 

"If just wheat made gains last year, I would say more wheat will be sown this year and prices will fall. But no, that's not happening. Corn, soybean and wheat prices are in a situation where neither is lagging too far behind the other."

 

Gorey said a 10%-20% rise in grains prices this year is very much a possibility.

 

In Asia, commodities brokerage JCI Shanghai said China's fresh purchases of U.S. soybeans in the last two weeks have totaled 13-15 cargoes, with six-to-eight cargoes of U.S. soybeans booked this week.

 

Premiums for soybeans delivered from the U.S. to China are currently around 163-170 cents a bushel to the Chicago Board of Trade May soybean futures contract, for shipment from western U.S. ports in March or April.

 

JCI added that good prospects for the domestic livestock and poultry industry this spring may be the key factor driving Chinese crushers to step up their soybean imports from the U.S. in recent weeks.

 

Besides, expectations of decline in China's rapeseed production this year have also pushed traders to increase their soybean imports.

 

Soybeans and rapeseed are both important sources of cooking oil.

 

Japan's Ministry of Agriculture, Forestry and Fisheries has bought a total of 80,000 metric tonnes of wheat from the U.S., Canada and Australia in a tender that concluded Thursday.

 

In other news, India's wheat plantings between Oct. 1 and Jan. 19 are estimated at a record 28.11 million hectares, up from 26.36 million hectares in the year-earlier period, the latest government data show.

 

Plantings of wheat so far have already surpassed last year's total of 26.6 million hectares.

 

Harvesting of India's wheat crop has begun, with the early sown crop in the western province of Gujarat already being harvested in very small daily volumes of 40-50 tonnes.