April 3, 2012

 

Asia's higher grain prices likely to slow down demand

Due to a surge in prices following two key reports released in the US last week, Asian grain demand is likely to be sluggish for the next few days, trade participants said Monday (Apr 2).

 

Importers expected corn prices to fall further this week but they have rebounded instead, which may damp demand and stall the recent round of purchases, said a Singapore-based executive with a global trading company.

 

Buyers in South Korea, China and Japan actively bought corn cargoes last week as the near-month CBOT futures contract fell to its lowest price since January 18. South American corn prices on a delivered basis in East Asia fell below US$300 a tonne.

 

CBOT May corn futures are now trading around US$6.50/bushel and traders expect prices to test US$6.70/bushel.

 

Most cash grain buyers are on the side lines but the pause in purchases will end once profit-taking starts in the futures market, said another importer in Seoul.

 

The USDA on Friday (Mar 30) released its quarterly domestic grain inventories data and its forecast for spring plantings acreage.

 

US corn stocks as of March 1 are estimated at 6.01 billion bushels, down 8% on year. Many traders shorted corn last week last week, anticipating a fall in prices amid potential acreage gains in the US, and are now cutting their losses, said Kaname Gokon, a Tokyo-based deputy general manager at Okato Shoji Co.

 

USDA also forecast that US corn acreage would reach a 75-year high of almost 96 million acres, but traders shrugged off the numbers as actual output will also hinge on the weather.

 

Many now fear that US corn stocks may fall below the USDA's current forecast of around 20 million tonnes at the end of current marketing year on August 31. However, some analysts say the fears are misplaced because the volume of corn being used for animal feed and ethanol is below expectations, though inventories will also depend on the volume of corn deliveries to China from now until end-August.

 

CBOT near-month May soy futures are now trading around US$14.13/bushel with traders expecting prices to test last year's peak of US$14.55/bushel sometime this month but not before some speculative downward correction.

 

"Even though the sentiment is bullish, I think there will be some profit-taking now after the recent gains," said Hiroyuki Kikukawa, general manager for research at Japan-based commodities brokerage Nihon Unicom.