March 29, 2011

 

US crop land shift pose profitable potential

 

 

An anticipated shift in US crop land presents a potential opportunity for profits, by taking short positions in CBOT corn and going long on soy ahead of a key acreage estimate, Asian trade executives and analysts said Monday (Mar 28).

 

The USDA spring plantings intentions survey due Thursday will also give fresh direction to Asian grains prices after recent sharp losses, they said.

 

Traders said many in the market are selling CBOT corn and buying CBOT soy ahead of the report, planning to buy back corn and sell soy to book gains once the data are released.

 

This is because market participants largely expect the USDA figures to show a shift in acreage toward corn from soy, said Koname Gokon, deputy general manager at Japanese commodity brokerage Okato Shoji Co.

 

Traders expect the most-active May corn futures contract on the CBOT to move in a range of US$6.70 to US$7.10 a bushel in the next few sessions, compared with US$6.94 a bushel currently.

 

They expect CBOT May wheat to trade between US$7.20 and US$7.50 a bushel compared with US$7.35 a bushel, and May soy in a range of US$13.40 to US$13.80 a bushel compared with US$13.62 a bushel.

 

They said corn is finding it difficult to sustain above US$7.00 a bushel while wheat is facing resistance around US$7.40 a bushel.

 

Last month, the USDA forecast that acreage of all major crops would rise this year, but the upcoming report carries far more weight as it is released closer to spring planting when many growers have already purchased seeds and fertilisers.

 

"Regardless of the numbers the USDA dishes out, there will be heightened volatility in the market early next week," said an analyst in Tokyo.

 

He said equally important are quarterly grains stocks figures that the USDA is expected to release this week.

 

US corn inventories are projected at a 15-year low by the end of August, and stocks may turn out to be even tighter if speculation that more than one million tonnes of US corn has been sold to China is confirmed.

 

Physical trading of grains in Asia is sluggish with many buyers and sellers reluctant to finalise deals at current price levels, as the market awaits the USDA numbers.

 

Japan's grain purchases have slowed as the country approaches the end of its financial year, and it is unclear whether the government will issue its regular food-grade wheat import tender Tuesday.

 

The lowest offer in a Bangladesh government tender for prompt shipment of 50,000 tonnes of wheat is US$344/tonne, cost, insurance and freight, quoted by India's Emmsons International Ltd., a government official said.

 

Taiwan's Maize Industry Procurement Association is likely to tender for a cargo of soy Wednesday for shipment in May.