September 15, 2011

US unfavourable weather to boost Asian grain prices

Amidst a constricting global supply-demand balance due to US unfavourable weather, together with a drastic increase in prices given to Thai rice farmers, Asian grain prices are likely to gain support.

Market participants said that there is near-term profit taking pressure, but fundamentals for the fourth quarter remain strong and a forecast revival in grains exports from India and Russia may not be enough to offset lower US and Thai availability.

The USDA Monday (Sep 12) cut its forecast for corn exports in the marketing year started September 1 by 6.8% to 41.9 million tonnes, and forecast closing stocks, leftover stocks at the end of the season at a multi-year low of 17 million tonnes.

Still, corn stocks are tight but not critical, and demand will likely decline if prices remain elevated, said a research analyst with MaxYield Cooperative in Iowa.

Corn is trading around a twenty-cent-a-bushel premium to wheat on the CBOT, with the most-active December contract around US$7.20 a bushel.

Soy prices are likely to rise due to sharply lower production in the US and China.

Hot and dry weather has reduced soy yields in the US and will trim output by 8.2% to a three-year low of 83.2 million tonnes, the International Grains Council said in a monthly report.

Supply of lower grades of wheat is ample, but high-protein wheat availability is tight due to drought conditions in some US growing areas.