March 20, 2012

 

Asia grain prices may relax on profit-taking

 

 

After several days of spectacular gains, Asian grain prices may ease in the next two days on profit-taking but overall fundamentals remain strong and cash market buyers continue to snap up cargoes, trade participants said Monday (Mar 19).

 

Near-month soy and corn futures on the Chicago Board of Trade are hovering around a six-month and four-month high, respectively, due to strong demand, particularly in China.

 

CBOT soys have ended higher 25 times in the last 33 trading days, moving to US$13.74 a bushel, and traders now expect a correction.

 

"Prices have increased too fast, too quickly, and a technical correction can happen anytime now despite the strong fundamentals," a trader in Melbourne said.

 

Buyers who have gone long on CBOT will now take profits ahead of closing account books for the first quarter, he added.

 

If CBOT May soys fall below US$13.60 a bushel, they may go all the way down to US$13.40, Kaname Gokon, a Tokyo-based deputy general manager at Okato Shoji Co., said.

 

Most traders put support for CBOT May wheat and corn futures at US$6.60 a bushel. The two contracts are currently trading around US$6.68. Gokon said wheat may fall to US$6.55 a bushel on profit-taking. However, traders and analysts cautioned that grain prices may begin to rebound soon as countries such as China lock in supply.

 

The USDA has already forecast that the country's corn stocks will fall 29% to 20 million tonnes by the end of the current marketing year ending August 31. It is cheaper to buy corn from the US to sell in deficit regions of China than transport locally, Dan Basse, president of Chicago-based consultancy AgResource, told a conference in Singapore last week.

 

"China bought a few million tonnes of old- and new-crop corn in the March-June period last year, for staggered delivery over several months. It isn't surprising if they are now repeating the purchase strategy again," a Singapore-based executive with a global commodity trader said.

 

Three trading companies were possibly involved in corn sales to buyers in China earlier this month, he said, but details weren't readily available. On March 9, the USDA lowered global soy closing stocks for the 2011-12 aggregate marketing year by 6% to 49.8 million tonnes due to a drought in South America.

 

"The South American shortfall has created an incremental demand for US soys, which aren't even planted yet," a Kuala Lumpur-based importer said.