March 17, 2008

 

Asia Grains Outlook on Monday: Prices may rebound on firm fundamentals

 

 

The grains complex ended in the red Monday as funds took profits to cover losses in the equities market, weighed by news of Bear Stearns' troubles.

 

On the Chicago Board of Trade, May corn briefly touched limit down, or 20 cents lower, before ending the day 10 1/4 cents down at US$5.59 1/4 a bushel. May wheat fell 52 1/2 cents to US$11.91 1/2 per bushel, and May soybeans settled limit down, 50 cents lower at US$13.52 3/4.

 

However, analysts see this as a short-term fall before the soft commodities complex continues its climb.

 

CBOT corn was up 2.6 cents/bu in electronic trading and wheat was up 10.4 cents/bu while soybean was trading unchanged from Friday's closing level.

 

A commission house analyst in the U.S. said that corn will be less impacted by the outside markets than other commodities as investors await the release of acreage-intentions report by the Unites States' Department of Agriculture.

 

"The fundamentals haven't changed. This is likely to be a temporary setback before the funds return to commodities which...will continue to boom," said Avtar Sandu, manager of Asian Commodities for Phillip Capital based in Singapore.

 

"The grains complex will also continue to hold up as long as crude oil prices remain above US$100 a barrel," said a trader based in Singapore.

 

Crude-oil prices lend support to soy and corn prices as these agricultural products can be converted to biofuels.

 

On the New York Mercantile Exchange, light sweet crude futures for April delivery traded at US$111.19 a barrel at 0153 GMT, up 98 cents in the Globex electronic session.

 

"Global vegetable oil prices are likely to test new highs in the near future," Zhang Liwei, a senior analyst with the China National Grain and Oils Information Center, said during the China 2008 Rapeseed Crop Production Outlook conference on Sunday.

 

A rapid increase in the European Union's biodiesel production capacity and output will further support global prices of rapeseed and rapeseed oil, said Zhang.

 

China's soybean oil prices will continue to rise on strong demand and high global soy oil prices, but the growth rate in soy oil imports will likely slow significantly due to the big volume of imports last year, he said.