Asia Grain Outlook on Friday: May test lower levels; supply, outside markets

 

 

Grains could test lower levels tracking a combination of negative fundamentals and weak sentiment in financial markets, despite holding firm overnight amid a broad commodities slump, analysts said Friday.

 

"There has been a change of sentiment since the beginning of this year, following the Chinese government's moves on lending control," said an analyst at one of the major commodities trading house.

 

"People are worried whether last year's stunning gains of some commodities could be justified, when liquidity is starting to be curbed," he said.

 

Soy and corn futures traded on the Chicago Board of Trade have fallen more than 10% since the beginning of the year.

 

The benchmark March soy futures were up 0.3% at US$9.17 a bushel at 0748 GMT; March corn futures were up 0.2% at US$3.54/bushel.

 

In the short term soy may be able to find psychological support at US$9.00/bushel, and corn at US$3.50/bushel, said Genichiro Higaki, head of the proprietary fund management team at Sumitomo Corp. in Tokyo.

 

But they could slide further to US$8.50 and US$3.20-US$3.30 respectively in February, especially since the South American crop looks very good so far, he added.

 

Ample global supplies of soy and corn have weighed on futures prices since early January, when the U.S. Department of Agriculture released its supply and demand reports.

 

Market participants have been closely watching the development of the crops in South America for clues for the next few weeks.

 

Compared with these fundamentals, "China is even more important," as its macro-economic policies can have an impact on both commodity demand and global financial markets, said Higaki.

 

"We have seen money flow out of risky assets such as commodities because of China's tightening signals, and it certainly will happen again."

 

China will import an estimated 3.3 million metric tonnes of soy in February, according to the China National Grain & Oils Information Center Friday.

 

Next week the customs department will release January import data; they have been estimated at 4.21 million tonnes, down from a monthly record of 4.78 million tonnes in December.