August 1, 2008


Asia Grain Outlook on Friday: Buying to remain slow ahead harvests



Trading in Asian grains is likely to remain slow in the coming week, as buyers wait for prices to fall when rice, corn, wheat and soybean harvests take place around the world in the second half of this year.


Many Asian countries have also completed most of their purchases of one or more grains for the year. South Korean buyers have completed imports of corn for the year, substituting wheat for much their feed corn needs, while Philippine flour millers have almost filled their food wheat needs.


"Only two flour millers in the Philippines are still importing wheat. The rest of them are well stocked for the year," said a wheat buyer at a Manila-based flour mill.


He said wheat buying in the Philippines is unlikely to be renewed in the second half of the year, despite expectations of a further fall in prices as the world prepares to harvest a record crop.


Wheat import costs in the Philippines have already fallen by US$80 a metric tonne for U.S. soft wheat and Canadian spring wheat. The landed cost of U.S. soft wheat in the Philippines has declined to US$390/tonne, on a cost and freight basis, while Canadian spring wheat is around US$470/tonne.


Weak demand and the pressure of oncoming harvests are also pushing down rice prices.


In Vietnam, the federal government last week cut the minimum export price of rice to US$600/tonne from US$750/tonne earlier as the harvest picks up pace across the country, a trader in Hanoi said.


She said the export price of rice in Vietnam is hovering around US$590-US$610/tonne for 5% broken rice, down from around US$725/tonne at the beginning of July, and a further fall in prices is likely after Aug. 15, once the harvest is complete.


The trader was skeptical about the chances of the government cutting the minimum export price any further, however, as she felt that international prices could be well supported at US$600/tonne in the short-term.


Asian traders feel that the big unknown for rice prices later this year is whether India decides to resume exports of rice. The government has indicated that in case of a bumper harvest this fall, it may review a ban on white rice exports that has been in place since March.


India was the third-largest rice exporter after Thailand and Vietnam, before it banned exports.


Meanwhile, bearish news is also emerging for soybeans in Asia, as good rains this week have improved the prospects for India's developing soybean crop.


"The rains this week have come as a boon for the soybean crop in Madhya Pradesh and Maharashtra states (key growing areas) and this augurs well for the overall national soybean output," said Rajesh Agrawal, a current member and past chairman of the Soybean Processors' Association of India.


He said the crop may exceed or at the very least equal last year's record crop of 10 million tonnes.

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