May 19, 2011

 

Asian grain prices may rise on EU and US weather

 

 

Dry weather in major growing regions in the EU and delayed plantings in the US will support Asian grain prices for the rest of the week, according to traders.

 

Traders said Asia's physical buying of wheat and corn has slowed down again due to a surge in prices.

 

A drought in France seems to be worsening, worrying all global buyers of good quality milling wheat, said a Singapore-based executive with a global trading company.

 

He said adverse weather elsewhere was affecting Asian markets as Southeast Asian countries are major corn and wheat importers.

 

"Last year it was drought in Russia, this year it looks like EU supply will be much lower than normal," said another trader in Tokyo.

 

He said France's wheat output may fall by 1.5-3.0 million tonnes this year.

 

EU countries together export more than 20 million tonnes of wheat annually, with France and Germany the largest suppliers.

 

When Russia was hit by a drought in 2010, wheat buyers had the option of falling back on US and EU supply, but dwindling inventories in the two regions may tighten supplies in the second half of 2011.

 

Dry weather has already dragged down winter wheat output in the US, with growers in many areas of Kansas, Texas, and Oklahoma unlikely to harvest the grain at all. More than half of the winter wheat crop in Kansas is estimated to be in poor condition.

 

Heavy flooding is further delaying US corn plantings and will likely push up prices, ANZ Banking Group said in a daily report.

 

The US government has estimated that only 63% of corn plantings were completed as of May 15 compared with 87% a year ago. The US is the world's largest corn exporter, accounting for more than 50% of the global trade.

 

"We have no option but to wait again for a price correction, as had happened last week," said a Seoul-based corn importer.

 

Corn prices hit an eight-week low last week, with the CBOT July contract falling to US$6.59 a bushel, prompting Asian buyers to snap up cargoes. South Korea alone bought close to 500,000 tonnes last week.