August 22, 2008

 

Asia Grain Outlook on Friday: Prices may rise, tracking crude, weaker dollar
   

    

Grain prices may continue to rise over the next few days as a weakening dollar and higher crude prices offer support to Chicago Board of Trade grain futures.

 

With not much of grain fundamentals in play right now, outside market influences are driving grain futures.

 

In Thursday's pit trading, wheat, corn and soybean futures settled higher on CBOT, though in electronic trading so far, futures are lower, as pre-weekend profit-taking takes over.

 

At 0551 GMT, December corn was down 5 cents at US$6.12 a bushel, while November soybeans were down 6 cents at US$13.42/bushel. The December wheat contract was down 13.6 cents at US$9.08/bushel.

 

Higher grain prices are also prompting many Asian buyers to put off their purchases until prices come down.

 

The Korea Feed Association, which buys corn and feed wheat on behalf of several South Korean feed companies, has bought only 45,000 metric tonnes of corn this month, canceling a tender to buy 220,000 tonnes of corn last week due to high prices.

 

"We are looking for prices to get lower before we commit any purchases," said an official at the KFA, adding "the KFA hasn't set any timeline for issuing fresh tenders to import corn."

 

South Korea buys around 8.8 million tonnes of corn annually, of which a large portion is imported by the KFA.

 

In other deals this week, Chinese importers bought a total of 3-4 soybean cargoes from Argentina and the U.S., commodities consultancy Shanghai JCI said Friday.

 

The shipments, for delivery in September and October, were bought at a premium of US$3.10-US$3.20/bushel to the CBOT September contract, on a cost and freight basis.

 

In other news, flooding may have caused damage to crops across India, though no estimate is yet available on how extensive the damage may be.

 

But judging by the fact that the flooding has been the worst in India's most populous and agriculturally key state of Uttar Pradesh, there may have been damage to the paddy crop.

 

There have also been reports of flooding in the state of Punjab and parts of southern India.

 

India is betting on higher paddy output to boost production of the summer-sown crop, sowing for which is nearing completion. Scant rains in July in west, central and south India have caused a drop in the sown area of every crop, with the exception of paddy and soybeans.

 

Paddy sowing is up 10% on year, so any rain damage to the crop can be a serious setback for a bumper summer-sown crop harvest and could fuel a rise in food prices.