March 13, 2012

 

International grain conference tackles South America drought

 

 

Trade participants said Monday (Mar 12) that the key issues to be discussed at an international grains conference this week are the impact of drought conditions on South American soy output, spring plantings in the US and physical demand in East Asia.

 

Anticipating further price increases, buyers are locking in supplies of corn and soy well in advance, and speakers and delegates at the conference could offer additional supply and demand cues, said a Singapore-based executive with a global commodity trading company.

 

The three-day conference starts Tuesday. It was organised by the Centre for Management Technology.

 

Traders said they expect the most active May corn, wheat and soy futures contracts on the Chicago Board of Trade to each rise by up to US$0.12 a bushel this week from current levels of around US$6.47, US$6.38 and US$13.38 a bushel, respectively.

 

Tight soy supply is prompting market participants to not only buy May CBOT contracts but also to unwind short positions on the November contract, said Kaname Gokon, the Tokyo-based deputy general manager at Okato Shoji Co.

 

The CBOT May contract's premium to November has narrowed to US$0.32 a bushel from US$0.44 since March 7.

 

The narrowing premium illustrates that investors expect the tight supply to continue until the fourth quarter.

 

The USDA Friday lowered its forecast for Argentina's 2012 soy output by 1.5 million tonnes to 46.5 million tonnes, and cut its forecast for Brazil's 2012 soy output by 3.5 million tonnes to 68.5 million tonnes.

 

"Soy is leading the grains complex and providing a little bit of support to prices but this may encourage growers in the US to expand spring acreage in the next quarter," said Abdolreza Abbassian, a senior economist with the United Nations' Food and Agriculture Organisation.

 

However, there will be competition for acreage, and it will be tough for soy to get additional acres because of high corn prices, said Siegfried Falk, co-editor of Hamburg-based Oil World.

 

In anticipation of higher prices, East Asian buyers are buying their feed grain requirements six months in advance. South Korea's Nonghyup Feed Inc. recently purchased 125,000 tonnes of feed corn for September-October arrival.