February 21, 2012

 

 

A global grains industry meeting in Singapore this week will focus on various grain issues such as drought in South America, slowing wheat exports from the Black Sea region and hopes for higher corn plantings in the US.

 

China's rising food imports and Australia's record wheat output which are likely to affect global supplies and prices are other issues that will dominate the conference. US corn, wheat and soy futures have risen for four of the last five weeks, driven largely by concerns over supplies from Latin America, lower exports from the Black Sea region and the euro zone debt crisis.

 

"The market has factored in a large acreage for corn and unchanged acreage for soy, so any change from that will be a key thing to watch," said Adam Davis, a senior commodity analyst at Merricks Capital in Melbourne.

 

"It looks like southern Brazil is generating a lot of concern and things are getting a little bit better for Argentina, I think there will be a lot of discussion around that."

 

Crop prospects in Brazil and Argentina, which together make up almost half of world soy output, have suffered from weeks of dry weather, lifting prices and sparking fears of food inflation.

 

The focus of the conference, being organised by the Russian Grain Union, a lobby group, will also turn to China, which accounts for more than half of the soy traded in the world. The country has turned to the world market to import corn in recent years, threatening to squeeze global supplies and fuelling concern over food inflation. Argentina said in its first official estimate the soy crop could be as small as 43.5 million tonnes due to drought damage, lower than many private forecasts.

 

Brazil's supply agency Conab said the nation's soy crop would fall to 69.23 million tonnes from 71.75 million estimated in January, after taking into account the effects of the drought that has hurt yields in the southern grain belt.

 

The USDA also cut its estimate of Brazil's crop to 72 million tonnes from 74 million last month. The market is closely watching crop progress in the Black Sea region, adverse weather in some parts of which has raised expectations of a cap on exports.

 

"Asian buyers are keen to find out what is going to be Russia's grain export policy and what is the update on crop conditions," said Ker Chung Yang, an analyst at Phillip Futures in Singapore. "Is there going to be a further slowdown in exports from the Black Sea region?"

 

Russian wheat exporters, who failed to win any business in Egypt's recent tender, are gradually being priced out of the export market, though prospects for renewed sales depend on price swings abroad, analysts and producers say.

 

The Russian government has been discussing a possible export duty to regulate grain exports, but a higher-than-expected final harvest figure of 93.9 million tonnes persuaded officials to forgo limits for now.

 

In Ukraine, grain traders have agreed to limit wheat exports to 1.7 million tonnes in the February-July period after a request from the government, which is concerned about domestic supplies, the newspaper reported. Still, there are prospects of higher grain supplies later this year with prospects of more corn plantings in the US

 

A US government report on Monday showed its farmers will plant the largest area with corn this spring since World War Two, which could double the razor-thin stocks of this year and defray costs to consumers and food companies.

 

In the wheat market, record large supplies from Australia will mean greater competition. Australia last week lifted its estimate for wheat production this year by 4.2% to a record 29.5 million tonnes, saying key growing regions completed harvesting before heavy rains.