February 20, 2009

Global grains prices may be nearing a bottom, and could consolidate around current levels over the next 2-3 months.

While analysts and traders vary on marginal gains or losses that various grains may experience in the short-term, pretty much everyone agrees that major price movements are not foreseen.

"I won't be surprised to see the stabilization of grains prices which began in mid-December continue over the next few months," said Luke Mathews, analyst with the Commonwealth Bank of Australia.

He, however, added that it's too early to say whether there will be a definite uptrend in prices.

Mathews said that as the year unfolds weather would hold the key to price gains as supplies remain tight, though the major supply blockages so far this year - drought in Argentina and Brazil - has already been factored into corn and soybean prices.

China too is struggling with a drought in its wheat producing areas, though with a substantial domestic stockpile it may tide over any shortfall, without need for large-scale imports.

"Right now, there's a sort of equilibrium in the grains market. Sellers are not selling much, buyers are not buying much," said Nobuyuki Chino, trader with Tokyo-based Unipac Grain Ltd.

He said that feed companies in Japan, the world's biggest corn importer, bought at a much slower pace this month than they did in 2008, since they expect prices to remain stagnant over the next few months.

Landed price of U.S. corn in Japan has remain unchanged at US$200/tonne, cost and freight basis, over the last month.

With dry bulk ocean freight unlikely to recover anytime soon, as industrial activity remains frigid globally, global grains buyers are also not wary of any freight price shock.