January 10, 2007

 

Asia Grain Outlook on Wednesday: Corn, wheat premiums may fall further

 

 

Premiums of corn and wheat delivered to Asia may fall further in the remainder of the week, on expected losses in Chicago Board of Trade futures.

 

Market talk is rife among CBOT traders that funds are seeking to rebalance their commodities portfolio by moving money out of corn and wheat into natural gas instead.

 

Traders are also eagerly awaiting the U.S. Department of Agriculture's crop report on Jan. 12 for a sense of corn and wheat demand and supply conditions.

 

In Asia, soybean imports by the world's largest importer - China - may rise over the next several days, after sluggish imports so far this month.

 

"For the first week of January, only one or two cargoes were bought by Chinese traders, mostly because many traders were still on holiday," an analyst with JCI China said.

 

Declines in CBOT soybean futures over the past few days will likely push soybean premiums lower and encourage more Chinese imports in the next several days, she added.

 

On Wednesday, the premium for soybean delivered from the U.S. to China was around 200 U.S. cents a bushel to the CBOT March contract.

 

Trading of wheat and corn also remained sluggish in Asia. Singapore-based traders said the grains market is relatively quiet because it is still very early in the year and many people have just returned from holidays.

 

Most traders are content to delay their purchases, in the hope of lower prices.

 

"People are looking at CBOT grains futures with great interest right now, and expect prices to fall further," said a trader with a Singapore broking company.

 

In addition, traders expect grains prices to fall slightly after the USDA crop report Friday, as a favorable outlook on U.S. crop production is expected following good weather conditions.

 

Profit-taking for wheat contracts on the CBOT has already begun ahead of the release of USDA data, and this has driven wheat prices downward, a trader at a large broking firm said.

 

"Wheat prices have already risen quite a lot (over the last several months), and cannot sustain these prices in light of an (expected) increase in wheat supply," he said.

 

In major deals expected in the remainder of the week, Japan's Ministry of Agriculture is expected to buy a total of 150,000 metric tonnes of wheat from the U.S., Canada and Australia in a tender to be concluded on Thursday.

 

Earlier this week, South Korea's Korea Feed Association bought 20,000 tonnes of corn Tuesday at US$208.3/tonne from Bunge in private negotiations.