Asia Grain Outlook on Friday: Prices may slip as big harvests loom

 

 

According to a report by U.S. Wheat Associates released late Thursday, U.S. exports of soft red winter wheat may start to slow as the U.S. Department of Agriculture expects large harvests in Europe and the Black Sea region.

 

The report said that as a result of big wheat harvests around the world, more of the U.S. soft wheat may be used as feed. Around 5.7 million tonnes of U.S. soft wheat is likely to be used in feed this year, four times the amount used last year.

 

However, a major constraint on the use of wheat for feed instead of corn is the premium of 48% that wheat prices still command over corn on the Chicago Board of Trade, making it a less attractive alternative for livestock feed in the U.S.

 

However, analysts said cheaper feed wheat from the Ukraine will be more attractive to buyers globally, and is likely to give a stiff competition to corn in the feed market this year.

 

In Asia, South Korea has taken the lead in switching a lot of its feed demand from corn to Ukrainian feed wheat.

 

More good news for Asia's grains importers came in a Standard Chartered research note Wednesday, which said dry bulk ocean freight rates will likely drift lower this quarter, before gaining some ground in the fourth quarter as European grains exports get into full swing.

 

Dry bulk freight costs have continued to decline over the last month on good vessel availability and lower iron ore and coal flows.

 

The Standard Chartered report said rice prices are also likely to soften further this year as stocks rise in the major exporting country of Vietnam.

 

Good weather has fueled a bumper harvest in Vietnam, especially in the key growing province of An Giang, it said, adding that Vietnam's rice output may rise 10% on year, which would accelerate the fall in prices. Vietnamese rice prices fell 11% on-month in July.

 

There is also bearish news for soybeans from India, where analysts said that continued good rains have boosted the prospects of the soybean crop, which is now likely to be more than 20% higher than last year's record 10 million tonnes.

 

A higher soybean harvest in India is likely to translate into lower edible oil imports as well as cheaper exports of Indian soymeal in Asian countries.

 

India's soymeal exports nearly tripled in the first four months of the fiscal year starting April 1, and the trend will likely be supported by a bumper harvest.