October 17, 2008


Asia Grain Outlook on Friday: Pressure remains; focus on CBOT, economic woes



Asian grain prices are likely to come under further pressure in coming sessions despite recent minor rebounds, weighed down by steep falls in Chicago Board of Trade grains contracts, analysts said Friday.


Expectations of a bumper wheat harvest in Australia will likely add to the already bearish mood, they said.


The CBOT wheat futures December contract ended Thursday down 1/2 cent at US$5.55 1/4 per bushel.


"I think wheat is nearing a psychological support line at around US$5.00 (a bushel) though the focus is still on the wider financial market uncertainties and the value of the dollar against local currencies," said Kenji Kobayashi, a grains analyst with Tokyo-based Kanetsu Asset Management.


"Fundamentals aren't so important at the moment but expectations of a good harvest in Australia will likely add to the negative mood, if anything."


Forecasts put Australia's new wheat crop output at around 19 million tonnes - well up from last year's actual production of 13 million tonnes but at the lower end of recent forecasts, which ranged from 20 million to 22 million tonnes, analysts said.


In China's main soybean producing regions, prices continued their downward trend in the week to Friday, weighed down primarily by hefty losses in CBOT futures and a lack of buying interest amid a general sentiment that prices will decline further.


Trading in China has been muted as crushers and traders were reluctant to buy on expectations that prices will continue to fall amid the bearish sentiment in the overall commodities market, analysts said.


CBOT's November soybean contract ended 9 cents higher at US$8.67 a bushel Thursday, after the contract dropped to its lowest level since May 2007 earlier in the session.


Oversold market conditions and concerns surrounding potential harvest slowdowns in the U.S. were the main factors for the bounce, though analysts said the upside will likely be capped by lingering global economic uncertainty.


In news related to rice, India hiked the minimum support price for all varieties by INR500 per metric tonne, Kapil Sibal, the federal minister for science and technology, told reporters Thursday.


The minimum support price, or the rate at which government agencies procure the grain to ensure a steady return for farmers, of common grade rice will now be INR9,000/tonne, while the price of grade A rice will be INR9,300/tonne.


Meanwhile, in the U.S., a rice growers association said last week's government projection for U.S. crop production is severely overstated, and suggested late planting and September hurricanes could render the crop almost 17% smaller than the official estimate.


The U.S. Rice Producers Association estimated the crop at 170.2 million hundredweight, with an average yield of 6,174 pounds per harvested acre. That's below the U.S. Department of Agriculture's projection of 204.1 million hundredweight and yield of 6,982 pounds.


CBOT's November rice contract finished up 6 1/2 cents at US$15.41 1/2 per hundredweight Thursday, off the day's low of US$14.95.


Meanwhile, CBOT corn contracts moderated their losses Thursday, with the most-active December contract losing 3 1/2 cents to settle at US$3.84 1/2 a bushel, off the day's low of US$3.71 1/2.


"I would expect corn to trade around the US$4.00 mark, with the focus firmly on whether crude oil can stage any kind of rebound in the coming days," said Kanetsu Asset Management's Kobayashi.

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