May 15, 2012

Asian grain prices seen lower

As investors take leads from steady progress in US plantings, Asian grain prices will likely remain moderate this week, which has raised the prospects of a large harvest of wheat, corn and soy this fall.

"Many traders had set up long positions, anticipating soy to rise above US$15 a bushel and corn above US$6.5 again, but latest supply and production estimates have given them a jolt," an exporter in Singapore said.

Around 0951 GMT, the most-active July soy futures contract on the Chicago Board of Trade was trading US$0.275 lower at US$13.785 a bushel and July corn was US$0.0325 lower at US$5.7775. July wheat was trading US$0.0225 lower at US$5.9475.

"Soy, the standout performer of 2012, has topped out, the wheels coming off in the last few weeks," FuturesTechs said in a research note.

"However, there hasn't been heavy volume in this selloff and the record high open interest hasn't fallen significantly yet", suggesting it is merely unwinding of overbought conditions and buyers should return soon, it said.

Traders said the selloff in soy was more out of panic than fundamentals as many fear that the commodity may be dragged down by corn and wheat. Speculators are unwinding positions due to caution despite strong fundamentals.

The USDA forecast Friday (May 11) that the country's soy closing stocks will likely hit a historical low of 4.4% of annual use at 3.94 million tonnes in the marketing year that ends August 31, 2013.

The USDA has also lowered the country's soy closing stocks forecast for 2011-12 by 16% to 5.7 million tonnes. The price outlook is more negative in corn than soy. The USDA has forecast a 20% rise in US 2012-13 corn output to a record 376 million tonnes on the back of higher plantings and favourable weather.

Buyers in Asia are taking advantage of the fall in prices. South Korea's largest feed miller, Nonghyup Feed Inc., is seeking three corn cargoes totalling 165,000 tonnes for November and December arrival and 55,000 tonnes feed wheat for October arrival in a tender closing Tuesday. Taiwan is seeking corn and soy in a Thursday tender.

The Korea Corn Processing Industry Association Friday purchased 110,000 tonnes of optional-origin corn at US$286.50/tonne and US$273.35/tonne for September arrival.