November 5, 2008


Asia Grain Outlook on Wednesday: Prices may modestly gain on outside markets



Grains prices are likely to move modestly higher in the next few days, as a semblance of stability returns to global financial markets.


"Affirmative things are happening for the grains market. Stable financial markets are bringing back liquidity to grains futures too," said a Seoul-based analyst.


However, there's not much expectation of a strong rally in the next one to two weeks and any price movements will be limited, he said.


"The momentum of the market is still quite bearish and has by no means turned bullish," he said.


Specifically for corn, the U.S. market will perceive a win for Barack Obama as supportive of prices, as he's known to be a supporter of ethanol subsidies.


However, in Wednesday's electronic trading on the Chicago Board of Trade, grains futures are trading lower from the overnight pit-trade closing, tracking losses in New York Mercantile Exchange crude oil futures.


The December corn contract is down 5 cents at US$4.08/bushel, while January soybeans are down 16 cents at US$9.43/bushel.


CBOT December wheat contract is down 10.25 cents at just over US$5.62/bushel.


In other news, South Korean analysts said the country's grains traders are facing a credit crunch, as banks are reluctant to extend lines of credit for imports of corn, soybeans and other farm products.


They said that while the overall volume of agricultural imports has still not been affected by the credit crunch, any extension of tight credit conditions beyond 2008 will have an adverse impact on import volumes.


However, South Korean grains traders are making use of a US$600-million credit line extended by U.S. Department of Agriculture for importing U.S. grains and agricultural products.


South Korea is a major buyer of U.S. corn, wheat and soybeans.


In deals this week, Japan's Ministry of Agriculture is expected to buy 96,000 metric tonnes U.S. wheat in a tender to be concluded on Thursday.


Since the Japanese government hasn't bought any U.S. wheat in the past two weekly wheat tenders, purchase of this 96,000 tonnes could be bullish for CBOT wheat futures.