March 19, 2012

 

Asian grain prices to increase on low supply, high demand

 

 

Low supplies of corn and soy due to the South American drought and high demand from China could push Asian grain prices higher this week, trade participants said Friday (Mar 16).

 

Many East Asian buyers--including in China, Taiwan, South Korea and Japan--are snapping up grain and oilseeds cargoes in anticipation of further price increases.

 

The cost of South Korea's feed-corn imports has risen 11% since late December. US feed-corn is now offered around US$335 a tonne, on a cost-and-freight basis at East Asian ports, an increase of almost 10% from US$306/tonne, C&F, two months ago.

 

CBOT soy futures are at a six-month high, and have closed higher 24 times in the past 32 trading days.

 

On a delivered basis, cash soy prices in East Asia are now above US$615/tonne and buyers are concerned that they are unlikely to see a significant correction anytime soon.

 

"Profit-taking in futures markets will come gradually but the overall outlook for rest of the month is bullish," said Hiroyuki Kikukawa, general manager for research at Japan-based commodities brokerage Nihon Unicom.

 

The size of spring plantings in the US will play a big role in determining the direction of grain prices from April, he said.

 

Near-month corn and soy futures on the Chicago Board of Trade may test US$7.20 and US$14.20 a bushel, respectively, anytime before August, but could decline sharply after that, Dan Basse, president of Chicago-based consultancy AgResource Co., said this week at an international grain conference here. They are currently around US$6.68 and US$13.66/bushel.

 

Soy prices are likely to average US$550 a tonne on a delivered basis in Rotterdam during the March-June period, up from US$520-US$530/tonne in February and US$509/tonne in January, Siegfried Falk, co-editor of Hamburg-based journal Oil World, said.

 

Some analysts project even higher prices, warning that much will depend on how many acres in the US are planted with corn instead of soy this spring.

 

US corn inventories are forecast to fall to a multi-year low by end-August, while rising prices in China could result in Chinese imports surpassing 5 million tonnes this year, analysts said.

 

Two Chinese officials at the CMT grain conference this week said the country has become a regular corn importer due to rising domestic demand, and noted that the population is projected to continue to rise for the next 20 years.

 

One of the officials said record-high corn output harvested this year is unlikely to eliminate China's need for import.