May 10, 2012

 

Asia grain's lower prices likely to accelerate demand 

 

 

Due to profit-taking following reports of good progress in US plantings, the latest drop in grain prices is likely to spur demand as Asian buyers will seek to cover needs before a rebound.

 

Prices may rise again as global supply is still tight, particularly in corn and soy, traders and analysts said.

 

The most-active July soy futures contract on the Chicago Board of Trade, which was near a four-year high above US$15 a bushel at the end of April, has eased significantly and is now trading around US$14.35.

 

CBOT July corn and wheat contracts are now trading around US$6.21 and US$6.12 respectively, down from US$6.3425 and US$6.5425 in end-April.

 

Buyers in South Korea and Taiwan purchased close to 400,000 tonnes of grains Tuesday (May 8) through tenders. Trading executives said deals involving a few hundred thousand tonnes were finalised privately this week in countries such as Indonesia, China and Japan.

 

A consortium of South Korean flour mills purchased a 36,100-tonne cargo of Australian wheat from Cargill for September 1-15 shipment.

 

The mills purchased a 70:30% blend of Australian Premium White and Australian Noodle Wheat around US$267/tonne, free on board, and Australian Hard around US$284/tonne, FOB, traders said.

 

Separately, South Korean flour mills also bought two US wheat cargoes of 23,000 tonnes each from Mitsui and United Grain, taking total purchases to more than 82,000 tonnes.

 

In the deal with Mitsui, it bought US Soft White with 9.5% and 8.5% protein, Hard Red Winter with 11.5% protein and Northern Spring with 14% protein at US$247.14/tonne, US$256.34/tonne and US$321.81/tonne, FOB, for shipment between July 20 and August 20.

 

South Korea's Major Feedmill Group purchased two cargoes totalling 112,000 tonnes of optional-origin feed wheat around US$272.30/tonne, basis cost and freight. It purchased one cargo from Cargill for arrival by September 10 and another from Mitsubishi for arrival by September 15, traders said.

 

"Global wheat supply is ample but prices can still be driven up by corn and soy," a trader in Seoul said.

 

"The major expansion in US corn plantings is at the mercy of weather. Even if output shows a big rise, the incremental demand from China will neutralise part of the gains," an executive with a Singapore-based commodities brokerage said.

 

A large part of the US soy crop that will be harvested in August has already been booked by importers due to the South American drought, he added.

 

On Tuesday, the Kaohsiung and Taichung branches of Taiwan's Breakfast Soy Procurement Association each purchased 60,000 tonnes of Brazilian soy at a US$3.333-a-bushel and US$3.2521-a-bushel premium over the CBOT November soy contract, C&F.