August 6, 2008


Asia Grain Outlook on Wednesday: Prices may fall; demand falters, good supply



Grains prices may fall in Asia in the next few days as demand slows and the weather for U.S. corn and soybean crops remains favorable.


Asian traders said Chinese soybean demand will slow until the Olympics are over at least, due to restrictions on operation of factories during this period.


A Tokyo-based analyst said there are reports that soybean crushing plants have temporarily shut down operations in China as the government takes steps to reduce air pollution during the games.


Meanwhile, Japan will have several traditional holidays next week, which will slow Japanese buying of corn.


"Traders are already in a holiday mood, with many traders off for vacations," one trader said.


However, traders said that if corn prices continue to fall, then Japanese buyers who haven't bought much corn recently due to high prices could enter the market later this month to meet their needs.


Adding to the bearish news for grains is the expected U.S. Department of Agriculture report next week, said another trader in Tokyo.


He said the report is likely to be bearish and project improvements in yield for both corn and soybeans, and there could be upward revisions in stocks of these commodities as well.


Analysts said there could be some respite from the bearishness, at least in corn, as corn contracts could find some good near-term support at US$5 a bushel and that may lead to a brief short-covering spree around the end of the week.


However, any rally is likely to be short-lived as the USDA report is expected to support the bears' views.


The story for wheat futures is similar to those of corn and soybeans, with the supply situation looking robust for the rest of the year.


A Singapore-based analyst said that not only are there expectations of bumper food-grade wheat harvests in the European Union and Australia, but feed wheat supply may also increase.


Ukraine is headed for a good wheat harvest, and around 70%-80% of its wheat crop is feed wheat, which will provide competition for corn in the global feed market, he said.


In other news, analysts in India continue to hope for a recovery in acreage of country's major pulses and cereal crops, which are currently being sown, even as government data points to decline in acreage of most major grains aside from rice and soybeans.


An Ahmedabad-based analyst said that while acreage data released last Friday looks bleak, monsoon rains have improved in India over the past 10 days so farmers may quicken the pace of sowing this month.

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