October 10, 2008

Asia Grain Outlook on Friday: Market focus on equities turmoil, USDA report



Asian grain prices will likely come under further pressure in coming days as commodities across the board continue to be hammered in the wake of sharp falls on global equity markets and mounting concerns about longer-term demand in a looming global recession, traders and analysts said Friday.

"Grains are in a downtrend and the bearish sentiment will remain until the global financial market turmoil calms down and a long term solution is found," said Genichiro Higaki, a grains analyst with Tokyo-based Sumitomo Corp.


"People are just looking to reduce risk so we're seeing a widespread pullout from most commodities, including grains, in favor of gold," he said.

In the near-term the market will focus on the release Friday of a key U.S. Department of Agriculture crop production and supply report, "though even that will likely take a back seat amid the wider financial crises," said Higaki.

Chicago Board of Trade corn rebounded on short-covering Thursday, with the December contract ending the day up 10 3/4 cents at US$4.38 1/4 a bushel, though gains will likely be short-lived and a downside test of US$4/bushel is likely, said another Tokyo-based grains analyst.

CBOT December wheat slipped 3 1/4 cents to US$6.04 3/4 per bushel Thursday while CBOT November rice fell 43 1/2 cents to US$16.86 1/2 per hundredweight, with traders citing long liquidation ahead of the USDA report, which some market observers believe will suggest higher than expected stockpiles.

CBOT rice has already come under heavy selling pressure in recent sessions but analysts said a test of the August low of US$16 now looks possible.

In Vietnam, traders lowered prices quoted for rice exports by 3% Friday as farmers stepped up efforts to sell their remaining stock to prepare for a new paddy rice crop, which gets underway in November. Traders said prices of 15% and 25% broken rice have fallen significantly this week to around US$425, from around US$480 last week.

In the Philippines, paddy rice output in the July to September quarter may be lower than previous forecasts due to high fertilizer costs. The agriculture department had forecast that paddy rice output would reach 3.45 million metric tonnes in the third quarter, 10% higher on year.

In other news, Japan will resume its grains tenders with new measures imposed Friday, having suspended purchases for the last four weeks following concerns over tainted foreign rice imports, a Ministry of Agriculture, Forestry and Fisheries official said.

Japan has introduced new regulations after pesticide-laden rice imports for use in glue manufacturing were recently used in food and beverage products. Under the new regulations importers will have to ship back or destroy grains cargoes at their own expense, if they are found to be of bad quality, the official said.

Meanwhile, Japanese glue manufacturer Asai was raided Friday as a part of an investigation into whether it sold tainted rice to a food wholesaler, the Kyodo news agency reported. Asai and another company, Mikasa Foods, are being investigated, the report said.

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