August 25, 2008

 

Asia Grain Outlook on Monday: Prices may keep falling as harvests near

   

 

Grain prices are likely to keep falling in the week ahead as approaching U.S. corn and soybean harvests will continue to pressure Chicago Board of Trade futures contracts.

 

Analysts said a rebound in the U.S. dollar and falling crude oil futures are bolstering the downward pressure on grain prices.

 

But occasional bargain hunting will provide brief respite to the bearish trend in grain prices, as apparent from gains in corn, wheat and soybean futures in CBOT's electronic session trading Monday after settling lower in Friday's pit trade.

 

At 0536 GMT, CBOT's December corn contract was trading 15.2 cents higher at US$6.21 a bushel, while the November soybean contract was 38 cents higher at US$13.65/bushel.

 

The December wheat contract was up 11.6 cents at US$9.02/bushel.

 

However, a trader in Tokyo said grain futures are likely to slide in the week ahead, with corn futures likely to trade in a range of US$5.75-US$6.25/bushel.

 

"The global economy is slowing down. China has also slowed down its soybean imports in recent weeks. In such circumstances, the elbow room for grains to rise is almost nonexistent, especially when the U.S. harvest is around the corner," said the trader.

 

But the trader added that the only major question at this point is how much damage to the U.S. soybean and corn crops has occurred because of the Midwest floods in June.

 

"Pollination of the U.S. corn and soybean crops has already been delayed by two weeks. Besides, there's also some concern about early frost affecting the maturing crop. Therefore, the size of the U.S. corn and soybean crops is still not certain," the trader added.

 

In Asia, the world's biggest corn importer, Japan, is off to a slow start for filling its usual 3.25 million tonnes of corn import needs for the fourth quarter of this year.

 

Traders said that so far, Japanese buyers have only imported 750,000 tonnes of corn, with 2.50 million tonnes still needed.

 

They added that Japanese buyers are likely to conclude buying only by the end of September and buying may continue into early October.

 

Japanese traders are betting on a fall in both prices of grains and ocean freight costs as the global economy cools down, so they are buying hand to mouth, hoping for a sharper fall in prices over the next few weeks.

 

In other news, India seems to be heading for lower output of every major crop in its summer sowing season, with the exception of soybeans and rice.

 

Despite an improvement in monsoon rains in August, the sown area of crops such as peanuts, cotton, corn and pulses are lower on year, according to government data released Friday.

 

Analysts said the deficit in sown area of these crops will likely persist, as the time for planting is almost over.

 

The only hope for higher total summer-sown grain output in India would be a sharp jump in paddy and soybean output which outweighs the loss in output of other crops. But a clear estimate of crop production is unlikely to be available before the end of September, when harvesting will begin.