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April 23, 2012

 

Asia grain prices to recover on new demand

 

 

Asian grain prices may increase slightly early next week on the back of fresh physical demand and positive leads from the futures markets, trade participants said Friday (April 20).

 

Near-month May wheat, corn and soy futures on the Chicago Board of Trade have seen a downward correction in recent weeks and are currently trading around US$6.23, US$6.24 and US$14.20 a bushel respectively.

 

Most traders and analysts expect grain prices to rise by 10 cents to 35 cents a bushel in the next few days.

 

Long liquidation and rolling over of positions on CBOT to July from May contracts have dragged down prices, but the outlook is now particularly bullish for soy, said Kaname Gokon, a Tokyo-based deputy general manager at Okato Shoji Co.

 

He said soy for May delivery can rise above US$14.50 a bushel by the end of the month.

 

There will be fresh buying after the recent correction and prices are unlikely to fall further, said Hiroyuki Kikukawa, general manager for research at Japan-based commodities brokerage Nihon Unicom.

 

He put resistance for CBOT May soy at the 2011 near-month peak of US$14.55 a bushel.

 

Analysts said physical supply of soy remains tight, which will support prices.

 

"No matter how favourable the weather is and the size of US plantings, the next soy and corn crops will only arrive by September, while China continues to actively make purchases," said a Singapore-based executive with a global commodity trading company.

 

He said the strong buying of grains in East Asia's physical markets is also supportive for prices.

 

The Seoul and Busan branches of the Korea Feed Association Friday together bought a cargo of optional origin feed wheat from Glencore at US$274.15 a tonne, basis cost and freight for arrival by Sept. 15, and traders expect the grain to be secured from Australia.

 

The Korea Corn Processing Industry Association Thursday purchased South American food grade corn at US$298.75/tonne, C&F.

 

The Taiwan Flour Millers' Association bought a cargo of U.S. milling wheat this week from Columbia Grain International, including Dark Northern Spring grade at US$360.75/tonne and Hard Red Winter at US$313.63/tonne, basis free-on-board. The freight charge is US$36.32/tonne and shipment between May 24 and June 7.

 

Taiwanese buyers also purchased 60,000 tonnes of Brazilian soy this week from Bunge at a US$2.01 a bushel premium over CBOT July futures, basis cost and freight for May 21-June 5 shipment.

 

Gains in soy prices are likely to be more profound than for wheat and corn, and this may widen the former's premium over the latter on CBOT, said Gokon.

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