Wheat, corn prices in Asia may take a downturn

Asian grain prices are likely to witness a downward correction after recent gains due to weak physical demand, according to trading executives and analysts.

 

"It was a technical rally on Thursday (Apr 22) and is unlikely to be sustained," an executive at a Singapore-based trading company said. Wheat futures on the Chicago Board of Trade are likely to fall below US$5.0/bushel again this week, he said.

 

CBOT July wheat futures contract ended down 5 1/2 cents, or 1.1%, at US$5.05 1/2 a bushel on Friday (Apr 23) after rising to a seven-week high on Thursday.

 

Traders said ample physical supply can weigh on prices. "There is still time before the new European crop enters the market in June and July but global inventories are more than adequate," a Tokyo-based importer said. Aggressive sales by Russia and Kazakhstan have resulted in less demand for the US wheat, he said.

 

Many physical buyers in Asia are keeping to the sidelines, waiting for a correction in prices.

 

Australian white wheat is being offered to buyers in Southeast Asia around US$242/tonne, basis cost and freight, but buyers are cautious, preferring levels below US$239/tonne.

 

A Japan-based importer said that speculative short covering has led to higher prices of wheat and corn futures recently that do not reflect realities in the physical markets. Many Asian importers of both wheat and corn just are not prepared to make purchases at current levels, he said.

 

CBOT July corn futures contract closed 10 1/2 cents lower Friday at US$3.61/bushel. Traders expect prices to fall below US$3.50/bushel soon.

 

Many buyers in South Korea and Japan have deferred purchases for September shipment by a few days, anticipating a downward correction.

 

On Tuesday (Apr 20) of last week, the Korea Corn Processing Industry Association, or Kocopia, failed to buy corn in a tender, citing high prices. The association had sought 55,000 tonnes of US No. 2 genetically modified corn in the tender, and the lowest bid was around US$226.34/tonne, basis cost and freight, from STX, a Seoul-based trader said.

 

Another importer in Seoul said traders have recently adopted a "wait-and-watch" attitude, but more tenders for import of corn are expected from South Korea this week, once prices decline.