April 26, 2012
Asian grain prices likely down over US mad cow fears
Amidst profit taking and fears of an outbreak of mad cow disease in the US, Asian grain prices may come under downward pressure later this week, trade participants said Wednesday (Apr 25).
An instance of the disease was reported in California Tuesday (Apr 24), the first such in US livestock since 2006.
Near-month wheat, corn and soy futures on the Chicago Board of Trade may fall towards US$6.15, US$6.0 and US$14.40 in the next few days from currently around US$6.3, US$6.23 and US$14.85, respectively, they said.
There is a downside risk in the grain market for the near term as outbreaks can adversely affect demand for wheat, corn and soymeal as animal feed, Phillip Futures investment analyst Lynette Tan said.
Although only one case has been reported so far, Asian beef importers have turned cautious and this may hurt demand, a grain importer in Seoul said.
Two South Korean retailers have already suspended US beef sales. Mad cow disease can cause fatal illness in those who eat infected cattle products.
Traders and analysts said any cut in direct meat imports from the US should push up demand for animal feed ingredients in Asian countries but the psychological impact on grain prices will still be bearish.
There will be spill over weakness as CBOT grain prices will be under downward pressure, a trader in Singapore said, adding that overall fundamentals are still strong.
"The situation is ripe for profit taking in soy as prices have risen too much, too fast," Tan said.
CBOT May soy futures hit a 43-month high of US$14.8675 a bushel Wednesday on tight supply in South America. The soy contract is now trading at a US$8.62 premium to May corn futures, compared with US$7.63 April 2. Prices rose on the back of fears that soy production in drought-hit Brazil and Argentina may fall further below already-conservative estimates, a Singapore-based commodities analyst said.
The latest concern is about a possible frost, and even freezing temperatures, in Argentina, Karl Setzer, an Iowa-based analyst with MaxYield Cooperative, said.
Reflecting fears of tightening supply, CBOT May soys' premium to the November contract has widened significantly to around US$1.24 a bushel, compared with just US$0.16 in end-February. The November contract represents the next US harvest, which will then be available for exports.