August 18, 2008

 

 

Grain prices are likely to remain volatile over the week as trendsetting Chicago Board of Trade grains futures seem to be responding more to external influences than grain fundamentals.

 

While a firm dollar and lower crude prices pushed grain futures lower Friday night, both have bounced back in Monday's electronic trading, as New York Mercantile Exchange crude oil futures recovered on concern about Tropical Storm Fay threatening oil drilling and refining facilities in southeastern U.S.

 

At 0520 GMT, the December corn contract on CBOT was 15.4 cents higher, at US$5.65 a bushel, while November soybeans were up 32.2 cents, at US$12.51/bushel. The December wheat contract was trading 19.4 cents higher, at US$8.68/bushel.

 

Analysts expect prices to be pressured lower in the near term due to an expected record global wheat harvest this year as well as potentially very large corn and soybean harvests in the U.S.

 

In Asia, India is expected to harvest a bumper summer-sown crop, including soybeans and rice.

 

A U.S. Department of Agriculture crop condition report expected tonight is likely to evaluate both corn and soybean crops in the U.S. to date as being in excellent condition, a Tokyo-based trader said.

 

The USDA report could spur long liquidation, especially in the September corn and soybean contracts, which expire at the end of August, he said.

 

"I expect the September corn contract to fall below US$5/bushel before it expires," the trader added.

 

At 0538 GMT, September corn was trading 14.2 cents higher, at US$5.44/bushel.

 

However, the trader said gold and crude oil contracts are often watched closely by grains traders around the world, and any rally in these commodities could support grain futures.

 

In other news, Vietnam has imposed taxes on rice exports priced above US$800 a tonne, free on board. This measure is unlikely to have much impact on rice export prices in Asia, as most varieties of Vietnamese rice are currently being quoted at US$550/tonne-US$650/tonne.

 

Vietnam's ongoing harvest and an expected bumper rice harvest in India in October are also expected to weigh on rice prices.