November 7, 2008
Asia Grain Outlook on Friday: Prices may slide on crude, equity weakness
Grains prices are likely to slide over the next few days as weakness in equity markets and falling crude oil prices pressure grains futures.
On the supply side, the United Nations' Food and Agricultural Organization came out with a report Thursday that will further encourage bears in the grains market.
According to the FAO, world production of wheat, rice, corn and soybeans are all expected to rise in 2008.
Global wheat production is expected to be up 11%, rice is likely to rise 2.4%, corn 2% and soybean production 7.8%.
The FAO report warned, however, that next year's crops could be in jeopardy if the credit crunch drags on. Low grain prices and credit scarcity could hit farm productivity, and in such a scenario grain prices could rise again in 2009.
Meanwhile, the report confirmed that ocean freight costs for shipping grains have fallen sharply in the past few months.
The International Grains Council's Grain Freight Index in October was down 59% from May, and is currently at 2006 levels, it said.
In other news, the Thai government Wednesday offered in an auction 3 million metric tonnes of its rice stocks to exporters.
However, it's not known how much rice was actually sold at the auction, which didn't receive an encouraging response from exporters.
At present, demand for white rice exports is lukewarm, so exporters aren't all that keen to stock up on rice, a trader in Bangkok said.
In deals this week, Japan's Ministry of Agriculture didn't buy any U.S. wheat in its weekly tender, for the third week in a row. This week, the government had tendered to buy 96,000 tonnes U.S. wheat, but rejected all bids.
However, the Taiwan Flour Mills Association bought on Wednesday 52,850 tonnes of U.S. No. 1 wheat for December shipment from Columbia Grain. The prices for three different grades of wheat ranged from US$282/tonne to US$337/tonne.