August 28, 2009

 

Asia Grain Outlook on Friday: Rice may ease; soybeans likely steady

 

 

Global prices of soybeans are likely to hold steady in the near-term due to strong demand, while those of rice are expected to ease as offered prices from Thailand are likely to fall, trade participants and analysts said Friday.

 

"A large soybean crop is in the offing in the U.S. next month but the world needs that harvest badly due to tight supply in various countries," said a Tokyo-based executive at a global trading company.

 

He said a better idea of the size of the U.S. harvest will be available in a monthly report on demand and supply due to be released around Sept. 11, but the general feedback is that the country is heading for a bumper harvest of soybeans, wheat and corn.


Ahead of the harvest, trading has been choppy on the Chicago Board of Trade.

 

CBOT September soybeans settled 23 3/4 cents higher Thursday at US$11.14 1/4 a bushel, and November soybeans finished 1/2 cent lower at US$9.96/bushel.

 

However, analysts said physical prices are still holding steady because of the drought in several parts of China.

 

China's drought has worsened this week in the north, and was developing fast in the south. China's major autumn-harvest grain producing areas are in the north. The autumn harvest accounts for more than 70% of the country's total grain output.

 

Close to 4.0 million hectares of agricultural land in China is facing severe drought.

 

"China has adequate stocks to take care of their immediate needs but if the drought worsens, it will have to use a large part of them and then step up imports for replenishment," said an analyst based in Singapore.

 

China imported 4.39 million metric tonnes of soybean in July, up 25% from a year earlier, while wheat imports surged to 85,078 tonnes from only 373 tonnes, according to data issued earlier this week.

 

Thai Rice Prices Likely To Ease

 

Thai rice prices are expected to ease following the end of a government intervention program, as premiums to prices of Vietnamese products have risen too high.

 

"Traditionally Vietnamese rice has been around US$30-US$40 cheaper than Thai produce but currently the differential is as high as US$130/tonne," said Chookiat Ophaswongse, president of the Thai Rice Exporters Association.

 

He said Thailand's white rice, 5% broken, is currently being offered at US$520/tonne free-on-board, while Vietnamese offers are at US$390/tonne.

 

Chookiat said Thai prices were high due to a government-run intervention program, but "now that the program has ended, we expect Thailand's rice export prices to adjust slightly lower."

 

In the long term, however, the price outlook will hinge on the extent of damage that drought inflicts on India's rice crop.

 

India was a major source of parboiled rice for African countries, but currently it is only exporting premium basmati grades, and if it is compelled to start imports next year, there will be upward pressure on prices.

 

Japan Buys Wheat; China To Sell Corn Reserves

 

Japan's Ministry of Agriculture, Forestry and Fisheries bought on Thursday 160,000 metric tonnes wheat in a tender, an agriculture ministry official said.

 

The imports are expected to arrive between Oct. 16 and Nov. 15.

 

China will sell 5.77 million tonnes of corn from reserves to large industrial processing plants in major producing areas of the north and northeast.

 

The news eased market concerns about supply pressure from the tens of millions of tonnes in government reserves, analysts said, because the corn will only be sold to large industrial processors with an annual capacity of at least 100,000 tonnes. The sales will be subsidized but the lower-priced corn won't be allowed to flow into markets and the amounts won't fill all of the processors' requirements.

 

On Thursday, CBOT's September corn contract settled up 2 1/2 cents at US$3.23/bushel, and December corn ended up 3 cents at US$3.29 1/4.

 

Traders and analysts said the move was not fueled by fundamental factors. Prices were flat to slightly lower throughout the day before climbing near the end of the session.

 

"Corn is only chasing soybean higher but supplies are adequate. Prices may ease after the harvest gathers momentum in the U.S. late next month," said a Japan-based trader.