October 8, 2008

  

Asia Grain Outlook on Wednesday: Upside capped despite CBOT bounce Tuesday
       

  

Asian grain prices may record moderate gains in coming days on the back of a mild technical rebound Tuesday on the Chicago Board of Trade, which in turn was helped by a weaker U.S. dollar.

 

Still, traders said the market will continue taking longer-term cues from wider financial market turmoil and the upside potential remains limited amid a general lack of fresh bullish fundamental newsflow.

 

Australia's most active wheat futures contract - ASX January - regained some of its recent losses Wednesday, after CBOT December wheat gained 8 cents to close Tuesday at US$6.03 1/2/bushel. At 0715 GMT, ASX January last traded at A$288.00 a metric tonne, up A$10.50 from Tuesday's settlement.

 

Traders in the U.S. said CBOT wheat gained on a technical rebound following recent steep falls, though general weakness in corn futures capped the upside.

 

"(CBOT) wheat will likely fluctuate around current levels though the bias remains on the downside," said a grains analyst in Tokyo.

 

"Fundamentally, there's no major news that will affect prices in the near term though there are concerns about longer-term demand. In the meantime, the market will continue taking cues primarily from movements in the value of the dollar and equities markets," he said.

 

CBOT December wheat will likely find support at US$5/bushel, "though whether that is a strong support depends on the dollar in coming days," he said.

 

Crops in Australia's Victoria state, including wheat, could suffer without heavy rainfall in coming weeks, De-Anne Price, an agronomist with the state's Department of Primary Industries, said Wednesday.

 

In mid-September, the government's Australian Bureau of Agricultural and Resource Economics forecast production from the new wheat crop in Victoria at 2.7 million metric tonnes, up from 1.9 million tonnes last year.

 

In other news, China has now harvested 63% of its autumn grain, the Ministry of Agriculture said Tuesday.

 

The 46.7 million hectares of grain includes 21.5 million hectares of corn, or 71% of total corn acreage, and 7.2 million hectares of soybean, or 79% of total soybean acreage. It also includes 11.7 million hectares of rice, or 67% of total rice area, it said.

 

If summer grain was included, China has harvested more than 70% of its total grain acreage this year, said the ministry in the statement on its web site.

 

Meanwhile, the Philippine Department of Agriculture said this week it has approved a 15% increase in the government's support price for yellow corn to PHP11.50 a kilogram, in a bid to help boost farmers' incomes amid rising input costs.

 

The department also said it was studying the possibility of increasing the support price further to PHP13/kg to make it at par with the government's support price for white corn.

 

The Philippines cultivates both white corn, used for human consumption, and yellow corn, a major component in animal feeds.

 

CBOT corn settled lower Tuesday with the December contract down 7 cents at US$4.17/bushel, while March corn ended down 9 cents at US$4.33 1/2. Prices were firm for much of the day but broke in the afternoon, with traders attributing the fall to a retreat in equities and crude oil.