July 2, 2008

Asia Grain Outlook on Wednesday: Soybean prices likely to rise further

Soybean prices are likely to keep rising during the remainder of this week as tight stocks and rising crude oil prices continue to be supportive.

In Wednesday's trading, Chicago Board of Trade soybean futures hit all-time highs for the July and November contracts, surpassing the highs set in overnight pit trade.

At 0537 GMT, July soybeans were trading at US$16.37 a bushel, up 9.6 cents from the overnight close, while the November contract was trading 11 cents higher at US$16.21/bushel.

In a report issued Wednesday, Rabobank scaled back its global soybean production estimate by 2.6 million metric tonnes to 238 million tonnes in 2008-09 (September-August), as the tightening credit market, high input costs for farming in Brazil and continued farmer-government strife in Argentina could lead to South American soybean plantings falling short of earlier estimates.

The current estimate is still 9% higher on year.

In deals this week, Japan's Ministry of Agriculture is likely to buy a total of 202,000 tonnes of wheat in a tender from the U.S., Canada and Australia. In contrast to earlier tenders, the ministry is seeking to procure the bulk of the wheat from Australia, not the U.S., from which it normally buys most of its wheat in the weekly tenders. The ministry hasn't provided any reasons for this.

Meanwhile, in China, domestic wheat prices are unlikely to fall in the short term, even though the country is likely to harvest a good crop. Harvesting of China's wheat crop is nearly complete.

Despite the good harvest, farmers are reluctant to sell their produce, as they expect higher prices. Besides, rising fuel, fertilizer and labor costs have pushed up the cost of wheat production, which will also support higher wheat prices.

China's total wheat output is expected to reach 112.5 million tonnes in 2008, up 2.4% from the previous year, according to data from the China National Grain and Oils Information Center.