September 24, 2011
Global economic concerns and ample supply will likely pressure Asian grain market early next week, but prices may start recovering after a few days if short covering kicks in, traders said Friday (Sep 23).
Wheat prices have tumbled to their lowest levels in 10 weeks and soy to their lowest so far in 2011. Meanwhile, corn is down 19% from the record high of almost US$8 a bushel reached in June on the Chicago Board of Trade.
Economic jitters are contributing to the slide, but adequate supply in the short term is also a factor, an importer said, citing the example of wheat, with countries including Ukraine, Russia, India and Australia competing aggressively for global market sales.
Russian wheat, which until two weeks ago was offered around US$290/tonne, free-on-board, is now available at US$262/tonne.
The sharp fall in prices will make it difficult for Indian wheat to compete with grain from the Black Sea region, though a weaker local currency against the US dollar is beneficial for exporters, traders said.
India recently made sales of at least 10,000 tonnes of wheat in containers to Southeast Asian destinations around US$287-$297/tonne, cost and freight, but it has since lost competitiveness in the face of lower-priced Black Sea wheat.
Australia is also facing difficulty disposing of its wheat as the country heads into another bumper harvest season in the fourth quarter.
The International Grains Council Friday raised Australia's 2011-12 wheat output forecast to 25.5 million tonnes from a previous estimate of 24.5 million tonnes on the back of good weather and higher acreage.
The council raised the forecast for Australia's ending wheat stocks on September 30, 2012 by 12% to 7.4 million tonnes compared with 6.8 million tonnes this year.
Technical buying and short covering may help prices to recover around mid-week though overall sentiment is weak, said a commodities broker.
In a rare development, European corn was offered this week to East Asian buyers around US$8/tonne cheaper than US-origin corn, due to large crops in Ukraine, Hungary and Romania.
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 soymeal from India and Argentina, which in turn is limiting demand for imported soy.