October 20, 2008

     

Asia Grain Outlook on Monday: Prices may rise on steadier CBOT outlook

    

 

Asian grain prices may rise slightly in coming days, helped by a rebound Friday in most contracts on the bellwether Chicago Board of Trade, though wheat prices may come under pressure as Australia's bumper wheat harvest gets underway.

 

Most forecasts put the Australian wheat crop to be harvested by year-end in a range of 19 million to 23 million metric tonnes, up from an actual harvest of 13 million tonnes in 2007.

 

"Wheat from the European Union and the Black Sea region continues to aggressively compete for business and with a large Australian harvest soon to be available for export on top of this, prices are under pressure," Mitch Morison, a general manager at agribusiness AWB Ltd.'s (AWB.AU) Australian commodity division, said in a statement Monday.

 

Still, short-covering and gains in neighboring markets pushed U.S. wheat futures higher Friday, with CBOT's December wheat contract up 11 cents at US$5.66 1/4 per bushel, up 2 3/4 cents on the week.

 

Wheat was due for a technical bounce after heavy recent sell-offs, though the focus will remain on the wider global financial turmoil and further volatility is likely in coming days, traders said.

 

In China, farmers have already sold most of the grain they planned to sell, so markets have been relatively quiet, China-based analysts said.

 

"For the remaining stocks, which we estimate are very low, farmers will probably sell ahead of the Spring Festival in January to get some cash," said Hai Yang, an analyst at Zhengzhou Esunny Information Technology Co., a unit of the Zhengzhou Commodity Exchange.

 

In other China grain news, the government sold 272,500 tonnes of wheat it bought earlier under the minimum purchase price program, or 77.6% of the 351,000 tonnes it planned to sell, the National Bureau of Statistics said.

 

Meanwhile, rice prices may find some support from recent news out of both the U.S. and the Philippines, which suggest lower-than-expected production in those countries.

 

A U.S. rice growers association said last week's government projection for the U.S. crop production is severely overstated, and suggested late planting and September hurricanes could leave 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, versus the U.S. Department of Agriculture's projection of 204.1 million hundredweight and yield of 6,982 pounds.

 

In the Philippines, farm output likely expanded at a slower pace in the third quarter, hobbled by sluggish rice production due to higher fertilizer cost, said Agriculture Secretary Arthur Yap Monday.

 

"I don't see it hitting 5%," Yap told reporters at the sidelines of a business meeting. "I know it's going to be positive, but it's not going to be 5%."

 

The agriculture department earlier warned that higher fertilizer cost will likely keep rice production from meeting a target of 9% in the July-September period.

 

On Friday, CBOT's November rice contract dropped 19 cents to US$15.22 1/2 per hundredweight.

 

Meanwhile, the CBOT's most-active December corn contract gained 18 1/2 cents to settle at US$4.03 a bushel. Analysts attributed corn's rise to firmness in global equities and the crude oil market.