May 8, 2012

 

Asia grain prices expected to drop

 

 

Asian grain prices are expected to fall from long liquidation as buyers take leads from strong progress in US plantings and poor global economy.

 

"External factors such as financial problems in the European Union are at play this week, which may prompt traders to exit their positions," said a grain importer in Tokyo.

 

The most active wheat, corn and soy futures for July delivery on the Chicago Board of Trade are trading around US$6.06, US$6.16 and US$14.67 a bushel.

 

Traders and analysts expect a downward correction of up to 15 cents a bushel in various grain futures before another strong rally sets in.

 

Fundamentals are strong because of Chinese demand and droughts in South America, but the market is taking a breather due to positive cues from steady progress in US plantings, said a trader in Singapore.

 

Analytical group Informa Economics Friday (April 4) estimated US corn acreage at 96.1 million acres compared with the government's preliminary forecast of 95.9 million acres.

 

Plantings are progressing at a historically quick pace, and together with favourable weather thus far point to a very large US corn harvest in September, ANZ Banking Group said in a research note.

 

A rise in corn output in the US, the world's largest exporter, is crucial to meet incremental demand in China, which was a fringe player in global imports until two years ago.

 

Some speculators are betting on Chinese demand and added a net 28,000 long contracts in CBOT corn futures in the week ended May 1, according to the latest data from the US Commodity Futures Trading Commission.

 

Net speculative long positions in soy and soymeal remain at a record high and near-record high, respectively.

 

Traders in the cash market point out that the potential decline in prices will boost demand for physical cargoes. Some of this pent-up demand is already evident.

 

South Korea's largest feedmiller, Nonghyup Feed Inc., Friday purchased 55,000 tonnes of South American soymeal from Glencore at US$527/tonne, basis cost and freight, for arrival by Sept. 15, trading executives said.

 

South Korea's Feed Leaders Committee Friday purchased 55,000 tonnes of optional-origin wheat from Concordia at US$274.26/tonne, basis cost and freight, for arrival by Sept. 25, they said.

 

Australian wheat may be supplied in the deal.

 

The Kaohsiung and Taichung branches of Taiwan's Breakfast Soybean Procurement Association Monday (April 7) announced tenders to import between 40,000 and 60,000 tonnes each of optional-origin soy in a tender that closes Tuesday (April 8).