October 24, 2008

Asia Grain Outlook on Friday: Imports may not revive on dollar, crunch


Asian grain imports may not revive even as prices have fallen sharply over the last several weeks, on traders'; inability to secure enough credit in the near term amid the ongoing global financial crisis, and a stronger dollar.

"Where can exporters secure U.S. dollars? In most Asian countries, dollar is reigning at multi-year highs," said Nicholas Chung, manager of Korea Development Bank's commodities team, based in Seoul.

The 85% decline in the last five months in the Baltic Dry Index, which measures ocean freight cost for shipping dry bulk goods such as iron ore, steel, coal and grains, is reflecting the extent to which international trade has been affected by the financial crisis, analysts said. As the credit squeeze deepens, grains importers are just sitting on the sidelines waiting for prices to fall further and credit flows to improve.

The bounce in Chicago Board of Trade grains futures that started Thursday morning session and is still on, would likely be a temporary correction, analysts said. They said that with the entire commodities complex tumbling, it won't be prudent to assume that grains could buck the trend.

Grains fundamentals, which are anyway rather weak, won't influence markets in the near term as sentiment is being driven by the financial crisis that is threatening to derail economic growth.

At 0558 GMT, December corn contract rose 5.2 cents from Thursday's overnight close to US$3.95/bushel. November soybeans rose 10.4 cents to US$8.95/bushel, while December wheat contract settled 1 cent lower at US$5.22/bushel.

In other news this week, Japan's Ministry of Agriculture canceled a tender to import 75,000 metric tonnes U.S. wheat Thursday, without giving any reason.

Meanwhile, traders in the Philippines bought 40,000 tonnes of Ukrainian wheat at US$180/tonne, cost and freight basis, for January arrival.

Last week, Philippine traders bought a similar quantity of wheat for around US$220/tonne for December arrival.

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