Asia Grain Outlook on Wednesday: Corn vulnerable to further selloff

 

 

Corn futures on the Chicago Board of Trade are likely to slide further, following Tuesday's production estimate by the U.S. Department of Agriculture.

 

"It's a rather surprising figure," which could lead to a further decline, coupled with any outside bearish factors, said Okato Shoji commodities analyst Koname Gokon.

 

If it breaks below the US$3.80-US$4.20 range, it will test support at US$3.50, he added.

 

Benchmark March corn futures on the Chicago Board of Trade were down 2.9% at US$3.81 a bushel at 0707 GMT.

 

They dropped by the exchange's daily trading limit Tuesday as the USDA report said the country could see record output of 13.15 billion bushels this year, up from its previous estimate of 12.92 billion and above the average of analysts' estimates at 12.82 billion.

 

"The fundamental story has put corn under heavy pressure, and if say crude oil prices fall, it will be very vulnerable to such outside factors," said an analyst at a commodities trading house in Beijing.

 

He added that soy and wheat didn't seem to be as weak as corn as negative factors, including China's possible retreat from the U.S. soy market and relatively large U.S. wheat inventories, weren't new to the market.

 

Soy and wheat in Wednesday's Asian trading time continued to be weighed down by the general weakness in commodities, after China announced two liquidity tightening measures Tuesday.

 

The People's Bank of China said late Tuesday that banks from next Monday must increase the share of deposits they park at the central bank by 50 basis points.

 

In its open-market operations, it raised the yield on its one-year bills for the first time in five months, following a similar surprise move in three-month bills last Thursday.

 

CBOT March soy futures are down 0.4% at US$9.74/bushel after falling by 3.2% Tuesday. CBOT March wheat futures are down 0.04% at US$5.35/bushel, after a 6.3% tumble overnight.

 

The USDA said soy production for 2009 was expected at 3.36 billion bushels, slightly above its previous estimate of 3.32 billion and market forecast of 3.34 billion bushels.

 

It also raised its forecast for wheat ending stocks for the 2009-10 marketing year, although it also said the acreage seeded with winter wheat from August through November was down 14% from a year earlier.