February 8, 2011

 

Asian grain prices seen to rise on tight supply

 

 

Asian grains prices may rise this week amid too much impact of tight stocks in major exporting countries even as buyers scramble to lock in deals.

 

Prices of wheat, corn and soy are already hovering around 30-month highs and most analysts and traders expect further gains.

 

The extremely cold weather in the US has affected movement of grains and there are also concerns that the winter plantings may be affected.

 

Most traders and analysts expect near-month wheat and corn futures on the CBOT to rise to US$8.90/bushel and US$7.0/bushel respectively this month up from currently around US$8.62/bushel and US$6.81/bushel.

 

For soy, the projections are for prices to rise to US$14.60, up from US$14.43.

 

Investors are piling up long positions because they believe the rally hasn't ended, said Koname Gokon, deputy general manager at Japanese commodity brokerage Okato Shoji Co.

 

In the week ending February 1, speculative net long positions in the CBOT rose by 4,000 contracts to a record 25,000 contracts, up 18% on the week.

 

Speculators added a net 21,000 contracts in corn, taking the net longs to 350,000. Speculative net longs in soy increased 10% to 160,000 contracts and open interest is at a record level.

 

Speculative net longs in soyoil rose a staggering 47% to 96,000 contracts.

 

Traders have set their sights now on the next weekly report of USDA, due Wednesday (Feb 9).

 

"If the USDA report indicates a further shrinking of grain stocks, markets will have another bout of rally," said a Singapore-based executive at a global trading company.

 

Another trader said the recent aggressive buying of wheat by countries in the Middle East and North Africa, already indicates a drawdown of stocks.

 

Markets are also taking note a recent assessment of the US Grains Council, which said China may import up to nine million tonnes corn in 2011.

 

"Estimates given to us were that China is short by 10-15 million tonnes in stocks and will need to import corn this year," USGC Chairman Terry Vinduska said in the council's weekly report.