September 8, 2008


Asia Grain Outlook on Monday: Prices may fall on weak fundamentals


Grain prices are likely to fall in the week ahead on weak fundamentals.


"The demand for grains right now, both in physical and futures markets, is quite sluggish. Investors don't have much appetite for commodities," said Nicholas Chung, commodities manager with the Korea Development Bank.


A trader with a multinational grain trading firm in Singapore said over the weekend the physical market is sluggish as Asian traders carefully watch crop progress in India and the U.S., both of which will be harvested from late-September onward.


"Sales of Indian soymeal, for instance, are a fraction of what they were in early 2008 as no one is willing to buy the new crop at US$410/tonne, and are expecting prices to fall," the trader said.


Kenji Kobayashi, an analyst with Kanetsu Asset Management in Tokyo, said yield reports due this week for U.S. corn and soybean crops are likely to accentuate bearishness in the market.


Although crop forecasts are likely be high, the probability that frost will hit corn and soybean crops is high in the critical late-September to early-October period, which may turn the market bullish later this month.


Analysts said technical support for the Chicago Board of Trade December corn contract is at US$5.55 a bushel, while resistance is around US$6.00/bushel. At 0557 GMT, November corn was trading at US$5.57/bushel, up 9.0 cents from Friday's pit-trade closing, on bargain hunting.


Support for the November soybean contract is around US$11.50 and resistance around US$13/bushel. The contract was trading at US$11.95/bushel, up 18 cents.


Feedmillers Struggling In Southeast Asia


At the 5th U.S.-Southeast Asia Agricultural Cooperators Conference, which concluded Friday in Siem Reap, Cambodia, Southeast Asia's feedmillers said they are struggling to cope with slow demand from the meat and poultry sector coupled with the rising cost of inputs, including corn and soybeans.


As a result, corn and soymeal imports are stagnating or falling this year in Vietnam, Malayasia, Indonesia and the Philippines.


"This is an unprecedented year. The fluctuations in our currency and economic turmoil have wiped off the 10% growth we saw in feed output the last two-three years," said Timothy Lee, director at Uni-President Vietnam Co., a Vietnamese feedmill.


Ric Pinca, a feedmiller based in the Philippines, said: "Imports (to the Philippines) of all feed raw materials have fallen this year as feed demand has plummeted. Corn was easily available in local markets to meet this reduced demand."


Thailand is an exception, as people switch to eating the more feed-intensive poultry from pork, which has led to a rise in imports of both soymeal and corn.


Southeast Asian millers said people will gradually get used to higher poultry and meat prices, and start consuming more of these commodities.


Major poultry producers, such as Thailand and Malaysia, are also banking on higher exports of processed products, such as chicken nuggets, to push up demand for poultry and feed materials in the next two-three years.


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