June 17, 2009

Wheat prices in Asia are likely to remain soft in the coming days amid a generally bearish supply outlook, which Tuesday pressured bellwether Chicago Board of Trade futures to six-week lows.

 

CBOT wheat has declined daily since last Wednesday, when the U.S. Department of Agriculture raised forecasts for new crop ending stocks, while the advancing U.S. harvest has also dragged sentiment lower, traders said.

 

CBOT's July wheat contract hit its lowest since May 7 on Tuesday though it rebounded slightly in Asian trading Wednesday. At 0534 GMT, e-CBOT July wheat was trading up 0.20 U.S. cent at US$5.66 a bushel, though traders attributed the rise to mild short-covering.

 

In Australia, production from the 2009-10 wheat crop was downgraded slightly this week to 22.0 million metric tonnes from a March forecast of 22.1 million tonnes by the government's chief commodities forecaster, the Australian Bureau of Agricultural and Resource Economics, or Abare.

 

If the forecast comes to pass, wheat output in the current crop year ending March 31, 2010 will still be up 2.8% from an actual 21.4 million tonnes produced last year, according to Abare's quarterly Crop Report.

 

Traders in Asia, however, said weaker prices following the recent rally may prompt buyers to ship more grain cargoes from the U.S.

 

Japan's Agriculture Ministry Tuesday said it was seeking 127,000 tonnes of U.S. wheat in a regular weekly tender to be concluded Thursday, while South Korea's Major Feedmill Group said it bought five Panamax cargoes totaling 275,000 tonnes of optional-origin and U.S.-origin corn in private deals with Cargill and Toepfer finalized late Monday.

 

Despite slightly softer CBOT corn futures, which in Asian trading at 0520 GMT were down 0.60 U.S. cents at US$4.03 a bushel, corn prices in China's major producing areas rose slightly in the week to Wednesday, with supply in northern areas tightening as most stocks remain in government reserves.

 

The Chinese government hasn't begun selling its stockpile, as the market expected, traders said.

 

In other Asian grain news, Thai government rice stockpiles have risen to 5 million-5.5 million tonnes, traders said this week.

 

Thailand's government previously said it would stockpile 6 million tonnes of milled rice by July 31 in an attempt to bolster the domestic market after the country's January-May rice exports slumped more than 29% on year.

 

However, some exporters said the stockpiling measures are effectively enhancing the competitiveness of neighboring Vietnam's rice, which are now at a discount of around US$100 a tonne.

 

"To take away 80% of the total expected export volume is too much; it is effectively placing the Thai rice industry in the hands of the government and leaving the private sector with too little supply," said Vichai Sriprasert, president of Bangkok-based Riceland International Co.