April 4, 2007

 

Asia Grain Outlook on Wednesday: Premiums may fall more on weak CBOT

 

 

Premiums of grains delivered to Asia may fall further toward the weekend, as Chicago Board of Trade grains futures continue to remain soft.

 

Weakness in CBOT corn futures is likely to persist for some time as the market continues to chew on the U.S. Department of Agriculture's prediction of a sharp rise in U.S. corn planting this year, with farmers enthused by high prices over the past several months.

 

Since corn has clearly emerged as the price leader for grains on CBOT, the weakness in corn will likely keep sentiment for other grains bearish too.

 

"Corn has been the leader and has dragged everything else with it," said an analyst report by the Commonwealth Bank of Australia.

 

"Technically, corn looks terrible. Major support levels have been broken with ease. And long-cycle momentum measures are being mown down. So punters, who're heavily invested in corn futures, are getting red lights everywhere and selling," it added.

 

In Asia, the fall in the prices of grains will likely spur feedmillers as well as food producers to speed up their grains imports, though it's likely they will do so gradually.

 

Traders said they would rather wait for a while and see where grains prices are headed over the next few days before making any import commitments.

 

However, a trader with Korea Feed Association said they are planning to hold a corn purchase tender sometime this week to take advantage of the fall in CBOT futures.

 

And on Friday night itself, when CBOT corn futures settled limit-down, two South Korean feed companies bought U.S. feed corn.

 

The Pusan branch of the Korea Feed Association, or KFA, bought 55,000 metric tonnes at US$222.43/tonne, while South Korea's Major Feedmill Group, or MFG, bought 110,000 metric tonnes at US$222.97/tonne.

 

Meantime, in wheat, Japan's Ministry of Agriculture resumed its import program for the financial year beginning April 1, announcing a tender to buy 170,000 tonnes of Australian, U.S. and Canadian wheat for May and June delivery.

 

The tender will be concluded Thursday.

 

Meantime, Mark Samson, the vice president (South Asia) for lobby group U.S. Wheat Associates, said food wheat buyers are unlikely to step up their imports big time, though some of the buyers may start imports for farther months such as August and September.

 

Most Asian countries are well-stocked with food wheat until May.