February 21, 2012

 

Asian grain prices stable as buyers look to Black Sea region

 

 

Asian grain prices will remain stable with little movement this week as investors seek alternative producers from the Black Sea region, trade participants said.

 

The Russian Grain Union is organizing a three-day international conference here starting Tuesday (Feb 21), and delegates from the Black Sea region will likely provide fresh updates on the impact of a harsh winter and lack of snow cover in some areas on the next crop, to be harvested in June.

 

Near-month wheat and corn prices on the Chicago Board of Trade will likely range between US$6.20 and US$6.50 a bushel, while soy will likely trade between US$12.50 and US$12.90/bushel, Kaname Gokon, the Tokyo-based deputy general manager at Okato Shoji Co. said.

 

The three contracts settled at US$6.4400, US$6.4175 and US$12.6750 a bushel, respectively, Friday (Feb 17). CBOT is closed Monday (Feb 20) for a public holiday.

 

Logistical constraints and port bottlenecks due to cold weather are also expected to be discussed at the conference, traders said.

 

"There is generally an ambiguity on developments related to grains emanating in the Black Sea region, so we expect to get a firsthand account" that will go some way toward clarifying the situation, a Singapore-based exporter said.

 

Russia and Ukraine have emerged as leading grain exporters in recent years. Availability or scarcity of grains from these countries can have a profound influence on prices, as evidenced by a surge after Russia banned shipments of grains due to drought in August 2010. Ukraine, meanwhile, has filled a crucial gap in the global corn trade left in recent months by reduced supply from the US, the world's largest exporter.

 

To avoid official restrictions on exports, trading companies in Ukraine have agreed to informally limit wheat exports in the marketing year ending June 30 to 4.8 million tonnes, or around half of initial projections. Last month, the International Grains Council lowered its forecast for Ukraine's wheat exports this year by 17% to 7.5 million tonnes.

 

Russia, which resumed wheat exports last July, earlier planned to restrict tax-free grain exports in 2011-12 to 24 million-25 million tonnes, but has since raised the cap to 27 million tonnes and so far held back from imposing export taxes--confounding expectations among traders for such a move to be applied to shipments from April. Nevertheless shipments are slow due to low temperatures and amid upward spiralling domestic prices.
 

Despite uncertainty prevailing over wheat shipments from the Black Sea region, prices are not likely to rise sharply this week, as there is ample supply available from Australia and the US.

 

"There may be modest gains, but a big jump is ruled out," said a Singapore-based executive with a global commodity trading company.