January 18, 2011

 

Asian grain prices may rise amid global economic growth revival

 

 

Asian grain prices may go up later this week from tight supply, adverse weather in many agricultural regions and speculations of strong demand amid a recovery in global economic growth.

 

Recent estimates from USDA that signal tight supply of corn and soy are also price-supportive.

 

The market for grains continues to be bullish and more gains are likely this week, said Koname Gokon, deputy general manager at Japanese commodity brokerage Okato Shoji Co.'s research division.

 

Many traders expect March corn futures contract on the CBOT to test US$7 a bushel this month. Markets are closed Monday (Jan 17) for a public holiday; the contract rose 9% last week to end at US$6.4875/bushel Friday (Jan 14), near a 30-month closing high.

 

Last week, the USDA lowered its forecast for US closing stocks of corn in 2010-11 to what would be a 15-year low of 19 million tonnes from 21 million tonnes previously, due to reduced output and strong demand to make ethanol.

 

Traders said there isn't much fresh support available for wheat but the commodity may rise on corn futures' coattails.

 

If corn does rise to US$7/bushel, wheat will break above US$8/bushel again, said Gokon. CBOT wheat futures fell 1% last week and ended Friday (Jan 14) at US$7.7325/bushel.

 

Wheat may be increasingly used as a substitute for corn in feed as a result of a bumper feed-wheat crop in Australia and as wheat's premium to corn narrows, said a Singapore-based executive at a global trading company.

 

Soy are also making gains, as buyers in China finalise deals ahead of the Lunar New Year and concerns persist about dry weather in Argentina, he said.

 

Traders expect more demand for US corn and soy if Argentina's crop is damaged by dry weather. The CBOT March soy futures contract ended at a two-year high Friday (Jan 14), at US$14.2225/bushel, and traders expect prices to test US$14.70/bushel this month.

 

USDA has lowered its projections for global closing stocks of soy in 2010-11 to 58 million tonnes from 60 million tonnes.