December 3, 2008

Asia Grain Outlook on Wednesday: Demand uncertainty may keep corn prices down


Corn prices are likely to remain weak in the next few days due to an uncertain demand outlook.


The emergence of feed wheat as a major competitor of corn this year has hit the export demand for corn.


Meantime, with crude oil prices falling below US$50 a barrel, the corn feedstock-based U.S. ethanol industry is also unlikely to maintain the fast growth rate of the past few years.


After falling slightly in overnight trade, Chicago Board of Trade corn futures were marginally higher in electronic trade Wednesday.


The December corn contract gained 1 cent to reach US$3.33 a bushel.


In corn-related deals. a Malaysia-based company bought 6,000 metric tonnes from India at US$210/tonne, cost and freight for December delivery.


India's corn exports in the 2008-09 marketing year (September-August) will likely be just around 200,000 tonnes, compared with 3 million tonnes in 2006-07, on a shrinking global corn demand.


In other grain deals, Japan's Ministry of Agriculture, Forestry and Fisheries is expected to buy a total of 72,000 tonnes of U.S. and Canadian feed wheat in a tender to be concluded Thursday.


Meantime, the ministry is planning to tighten its watch over rice distribution in Japan, the Daily Yomiuri reported.


A major controversy erupted in October when tainted rice found its way into the food chain, as producers used it to manufacture snacks and liquor.


The proposed new system will make it mandatory to maintain records at all transaction stages for not only milled and unmilled rice but rice products as well.


The government will insist on transaction records as rice changes hands from farmers to cooperatives, wholesalers, foodmakers, restaurants and retailers, the report said.


Rice dealers and restaurants aren't too pleased about the proposed new laws as it will impose new administrative burdens on them.


In other rice news, prices in South Korea are rising despite a good harvest this year, according to a JoongAng Daily report Wednesday.


The daily said the average price of a 20-kilogram rice bag was KRW46,352 Dec. 2, up 7.2% on year, adding the average rice price in November was 7% higher on year.


Rice prices are rising since the cost of production, including fertilizer prices, has increased sharply since last year, the newspaper quoted industry officials as saying.

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