January 17, 2011
Asia sees more demand for corn, soy on USDA data
Corn prices are likely to be higher in the coming week, as USDA's optimistic crop data released on Wednesday (Jan 12) tightened the outlook for end-of-season inventories.
"Demand for corn from South Korea, Taiwan and Japan should remain steady and lend support to the physical market. However, it is domestic US demand which investors are watching out for as ethanol demand has gone up," said a Tokyo-based commodities analyst, who pegs resistance for CBOT March corn at US$6.55 a bushel next week.
CBOT corn for March delivery settled up US$0.11 1/2, or 1.8%, at US$6.42 1/2 a bushel on Thursday (Jan 13), after brushing against a 30-month high.
For soy, the USDA projected 2010 US production at 3.329 billion bushels, down from the 3.375 billion bushels estimated in November. CBOT March soy, the most active contract, settled US$0.01 or 0.1% higher at US$14.16, after rising 4.3% on Wednesday (Jan 12).
The upside may be limited in the short-term for soy as physical trade is expected to slow ahead of the Lunar New Year holiday next month in China, the world's largest soy importer, the analyst in Tokyo said.
The grain market "will be choppy, particularly in the first quarter of 2011, with corn remaining especially elevated on thin global stocks," according to a research report released Friday (Jan 14).
Soy output is also likely to be affected by the La Nina weather episode that is causing drought in producing areas of South America.
However, grain prices are unlikely to rally to levels reached in 2008 "unless spring acreage fails to recover and global weather conditions continue to disappoint," as ample grain stocks are likely to contain price pressures in Asia, the bank said.
In China, grain reserves are sufficient to help the government control inflation, although uncertain weather remains a big risk for the country's grain output in 2011, said Yao Jingyuan, chief economist of the National Bureau of Statistics.
The government can put reserves in the market "whenever necessary," even if grain output falls, he said.
China has about 200 million tonnes of grains in government reserves, Chinese Premier Wen Jiabao said earlier.
China is also likely to sell 500,000 tonnes of edible oil to major crushers including Cofco Group and Yihai Kerry Investment Co. to ensure market supply, as the crushers are otherwise reluctant to produce due to poor margins, the China Business News reported Thursday (Jan 13).
The government will offer mostly crude soyoil and some crude rapeseed oil to the producers to be refined and sold on the open market, it said, citing unnamed sources. Details of the plan aren't yet finalised.
