May 9, 2011

 

CBOT grain futures influence buying

 

 

CBOT weaker grain futures during Asian trading timing and decreasing cash market prices will most probably encourage fresh physical buying for the following week as importers try to make use of the most recent downward correction to their advantage.

 

CBOT wheat, corn and soy futures have declined since early last week and the correction accelerated on Thursday (May 5), in tandem with a broad-based commodities sell-off.

 

It is a good opportunity for buyers in the cash market to make their purchases at current price levels, said a broker.

 

Near-month CBOT May corn futures are now more than 10% off the record high set on April 11. Physical corn prices on a delivered basis in southeast and north Asia have since declined by around US$40/tonne. Argentine corn is offered around US$342/tonne, cost and freight Malaysia, for late June shipment.

 

Australian wheat is being now offered around US$10/tonne cheaper than a week earlier. Australian Standard White is offered around US$320/tonne, free-on-board for shipment in June and July, and Australian Premium White wheat is available at US$365/tonne, FOB.

 

Wheat prices have retreated to levels last seen in early December 2010, when weak prices attracted strong fund buying that helped boost commodity prices, ANZ Banking Group said.

 

Some analysts said the latest downward correction in grain prices is likely due to strategic profit-taking by institutional funds, adding grain prices could recoup losses later this month.

 

Fundamentals in grains are strong due to concerns over weather and delay in spring plantings in the US, but weakness in metals and crude oil is weighing on prices, said the broker.

 

Fund outflows from commodities markets are sending markets lower, ANZ said, referring to the movements in wheat and copper futures prices which have moved in tandem since last month despite being unrelated commodities.

 

Many physical buyers made aggressive purchases during the last major downward correction in grain prices following the earthquake in Japan in March and similar activity is expected this time around, said another trader.

 

South Korea's feed and flour millers purchased at least 705,000 tonnes of grains and oilmeals in a short span of just two to three days in the week following the Japanese quake.

 

When prices are relatively stable, importers usually purchase less than half of this volume in a week.

 

"We are receiving a lot of enquiries from Southeast Asian buyers for corn and soymeal but they are not biting yet," said the second trader.

 

Traders said Malaysia is looking for corn for July shipment. Buyers in Japan and South Korea are also keen to cover their corn import needs for the second half of the year.

 

Pakistan's milling wheat from the ongoing harvest is actively trading in the market and more than 200,000 tonnes have already been sold.

 

Exports from Pakistan's new crop wheat may hit one million tonnes by August, said Muhammed Najib Balagamwalla, chairman of Karachi-based commodities trading company Seatrade Group.