Asia Grain Outlook on Monday: Grains up on short covering; upside limited

Grain prices Monday recovered some ground lost earlier this year on the back of short covering ahead of a U.S. Department of Agriculture report on global supply and demand, but analysts were cautious about further upside, citing dollar strength.

"This is a corrective gain, supported by bullish sentiment over the coming USDA report," said Hiroyuki Kikukawa, head of research at IDO Securities in Tokyo.

Grains have fallen by more than 10% since the beginning of this year, mostly due bearish fundamentals suggested by reports issued by the U.S. Department of Agriculture in early January and the gains posted by the U.S. dollar against other currencies.

Analysts expected the report, to be published Tuesday, to revise downward an estimate of U.S. grain and soy stocks when the current marketing year ends September.

It's unlikely that prices will continue to fall in the near term given the extent of the decline earlier this year, said an analyst at a major commodities trading house.

"I'm cautiously optimistic if the reports turn out to be as bullish as expected, but I don't think this is time for bargain hunting," he added.

Putting fundamentals aside, analysts said grains will be weighed by a strong dollar.

Furthermore, any further move by China to tighten credit could also have a bearish impact on the overall commodities complex, analysts said, noting that stunning gains of some commodities last year were partly due to ample liquidity.

At 0846 GMT, benchmark March soy futures on the Chicago Board of Trade were 1.4% higher than the CBOT close Friday in electronic trading, at US$9.26/bushel. March corn futures were trading 1.4% higher on e-CBOT at US$3.56/bushel and March wheat futures were up 1.4% at US$4.80/bushel.