September 23, 2011

 

Global grain prices may decline in Q4

 

 

As new supply from the US enters the market, global prices of wheat, corn and soy may fall in the fourth quarter.

 

According to analysts and traders who participated in two separate conferences in the region, the global supply of these grains is not as tight as was being feared earlier. Grains futures on the Chicago Board of Trade are already at their lowest in more than a month and more downside is expected.

 

Amid improving supply around the world, the food price index of the United Nations Food and Agriculture Organization may fall this month after holding steady in the previous months, said Abdolreza Abbassian, a senior economist with FAO.

 

The current government estimate for US soy output of around 84 million tonnes is on the lower side and may be revised up as the harvest gathers momentum in the next few months, said Roy Bardole, chairman of the US Soybean Export Council.

 

In several parts of the "I-states," the crop has benefited immensely from heat and sunshine in August, increasing protein in the beans, he said. The I-states - Iowa, Indiana and Illinois - account for about half of US soy production.

 

In the case of corn, an upward revision in yield is expected. The US accounts for more than half the global market share in corn.

 

In areas such as North Dakota, South Dakota, northern Iowa and Minnesota, yields seem to be underestimated and could be revised higher, said Frank Kralicek, a member of the Asia Advisory Team of the US Grains Council.

 

The average national yield may be 149-150 bushels/acre, up from the current estimate of 148 bushels, he said.

 

In addition to improving prospects in the US, there is also increased supply elsewhere, said a Singapore-based executive with a global commodities trading company.

 

In a rare development, EU corn is now being offered to East Asian buyers around US$8/tonne cheaper than US origin corn, following large crops in Ukraine, Hungary and Rumania. India this week sold its first new crop cargo to South Korea, at a price that was at least US$24/tonne lower than prices offered by US suppliers.

 

East Asian buyers are also snapping up cheaper soy meal from India and Argentina, which in turn is limiting demand for imported soy.

 

Prices of oilseeds and vegetable oils may fall in the next few months, though a revival is expected again early next year, Hamburg-based commodities analyst, Thomas Mielke said.

 

A Malaysian trader said that a wide choice of origins is available in wheat as Australia, India, Russia and Ukraine compete to dispose off surplus stocks, forcing CBOT wheat futures down to a 10-week low, with physical prices falling below US$300/tonne.