March 10, 2011

 

Asian grain prices seen to be slightly changed

 

 

Asian grain prices are likely to be little changed in the near-term as investors await fresh leads from USDA's monthly demand-and-supply report.

 

"The market is likely to mostly move sideways until fresh leads emerge," said a Singapore-based executive with a global commodities trading company.

 

He said no major changes are expected in the balance sheet for wheat, corn and soy but recent monthly reports indicate that the USDA has a penchant to spring surprises.

 

For the medium term, corn has the most bullish potential among the major grains. Corn inventories in the US – the world's largest exporter – may fall to a 15-year low of 17.1 million tonnes at the end of August from 43.4 million tonnes a year earlier, according to the USDA forecast.

 

It is unlikely to get worse than that, said another trader; many investors aren't taking any chances, having liquidated longs expecting an upward revision in projections because of reduction in demand in countries such as South Korea, which is tackling its worst-ever outbreak of FMD.

 

Traders said any expansion in corn acreage will potentially boost output but the fresh supplies will come in only in the last quarter.

 

The current tight corn supply is reflected in the narrowing premium of wheat to corn. Wheat's premium to corn for the most active contract on the CBOT has slipped to just US$0.74 now, from US$1.77 in mid-December.

 

US corn for August shipment is being offered at a large premium to earlier months because supplies will be quite tight towards the tail-end of the marketing year.

 

Corn for August shipment to Japan from the US Gulf coast is offered at a US$10-$15/tonne premium, basis cost and freight to shipment in July.

 

However, a recent downward correction in prices amid long speculative liquidation and profit-taking has presented a physical buying opportunity to Asian importers. Some buyers are locking in purchases while others aren't biting yet, hoping for a further downward correction.

 

South Korea's largest feedmiller, Nonghyup Feed Inc. or Nofi, Tuesday bought two cargoes totaling 110,000 tonnes of corn in a tender for June arrival.

 

A cargo was purchased at US$1.93 over the CBOT May futures contract from Cargill; another cargo was purchased from Alfred C. Toepfer International at US$1.7812 over CBOT July futures; both prices were basis cost and freight.

 

Japan's agriculture ministry Wednesday cancelled a sell-buy-sell tender for the import of 30,000 tonnes of feed wheat and 200,000 tonnes of feed barley due to a lack of buyers and sellers. The ministry was seeking the grain for bulk shipment by June 30.