Asia Grain Outlook on Wednesday: CBOT wheat hits 2-week lows; may fall more

 

 

Wheat prices on the bellwether Chicago Board of Trade sank to two-week lows in the U.S. overnight, falling for a fifth consecutive session, with sluggish global demand and high inventories spurring liquidation.

 

Though prices rebounded in Asian trading Wednesday--at 0426 GMT, e-CBOT's December wheat contract was trading up 3.75 cents at US$5.3675 a bushel--traders said CBOT wheat is likely to fall further in coming sessions, a scenario that would likely keep prices in Asia under pressure, too.

 

"Domestically (in the U.S.) and globally, supply and demand fundamentals both favor lower prices," said Brett Boyer, director of research for Brock Associates in Milwaukee. "There's plenty of wheat out there, and there's simply not enough demand to suck it up. Even with the weak dollar, U.S. wheat is overpriced."

 

In India, wheat futures were expected to open little changed Wednesday amid a general lack of fresh cues, traders said.

 

"The government is yet to take a decision on the sale price of wheat to be released in the open market," said one India-based trader. However, distant forward contracts may decline due to high output expectations and good sowing, he said.

 

India's winter-sown wheat area as of Nov. 19 rose to 9.39 million hectares from 8.57 million hectares a year earlier.

 

The country is targeting 2009-10 wheat output at a record 82 million metric tonnes compared with 80.59 million tonnes in 2008-09.

 

Corn prices are also expected to remain under pressure in coming sessions, pressured by weakness on the bellwether CBOT, traders said.

 

Though December corn futures on e-CBOT rebounded slightly Wednesday in Asian trading, by 4.75 cents, a combination of profit-taking by funds and technical selling drove prices lower in the U.S. overnight.

 

Tuesday, CBOT's December contract settled 11.25 cents lower at US$3.76/bushel.

 

The market slumped with U.S. wheat futures, while neighboring CBOT soy stayed supported. Corn and wheat lack the fundamental support from strong demand that helped boost soy, traders said.

 

CBOT soy futures ended higher Tuesday, managing to divorce itself from the bearish tonnee in other commodities on strong underlying demand.

 

At 0436 GMT, e-CBOT's January soy contract was trading four cents higher at US$10.50, having risen by four cents in the U.S. overnight.

 

Traders have attributed the rally in soy to bullish demand from China in recent months.

 

According to a Ministry of Commerce report Monday, China is likely to import 2.96 million tonnes of soy in December, an increase compared with November but a fall compared with December 2008, when China imported 3.3 million tonnes.

 

In other news, the Philippines could still eke out slight growth in agricultural production in 2009, despite the devastation to the sector by recent typhoons, a senior government official said Wednesday.

 

"We're looking at the lower end of the target," Agriculture Secretary Arthur Yap told reporters on the sidelines of an investment forum.

 

The agriculture department has downgraded to a range of 0.5%-1.5% the growth target for this year from 3% after typhoons Ketsana and Parma hit the country in September and October.

 

Yap said a strong recovery in crop production, which accounts for half of farm output, is likely in the first quarter but raised doubts about whether the government could reach its goal of rice self-sufficiency by 2013.