Grain prices may recover in Asia

Asian grain prices may recover slightly due to fresh buying over the next few days after Friday's (May 28) sell-off, according to trading executives.

 

They said Asian buyers, both in physical and futures, may take advantage of the latest decline and opt to make small purchases. "The market is a bit oversold after Friday's slump in prices and may recover marginally for a couple of days," said a Singapore-based commodities analyst.

 

July corn futures on the Chicago Board of Trade ended 14 1/4 cents or 3.8% lower Friday at US$3.59 a bushel. The July soy contract ended 14 cents or 1.5% lower at US$9.37 3/4 a bushel. The July wheat contract closed down 10 cents or 2.1% at US$4.57 3/4 a bushel.

 

CBOT is closed Monday (May 31) for the Memorial Day holiday.

 

"There's further downside potential, but before that happens, a small technical recovery is in the cards," said a Tokyo-based trading executive. He said favourable weather in the US, which has led to good progress in both corn and soy plantings, is weighing on prices.

 

Many traders expect CBOT July corn futures to soon fall to $3.50 a bushel after a mild recovery. They said the overall fundamentals are quite bearish, though technical buying and short covering can help prices in the near term.

 

Wheat is mainly following corn downwards and there is not hope for much of a recovery, said a trader in Singapore.

 

Sentiment is also bearish for wheat due to upcoming harvests in the US, Europe, Russia and neighboring countries. Traders said CBOT July wheat futures may fall below US$4.50 a bushel early next month.

 

In soy, the market has started factoring in a good US harvest later this year. The CBOT November soy futures contract settled 11 cents or 1.2% lower Friday at US$9.07 3/4 a bushel.

 

Soy prices have so far been supported by strong demand in China and domestic demand in South America amid replenishment of stocks following last year's poor harvest there, but this cannot last forever, ANZ Banking Group said in a research note last week.

 

It said a slowdown in domestic demand in South America and export pressure will have a downward bearing on world prices sooner rather than later.

 

Traders said after excessive soy shipments to China in May, purchases are now expected to be slow next month.

 

In other news, Taiwan's Corn Industry Procurement Association Friday bought 60,000 tonnes of US corn from Mitsui in a tender at US$232.60/tonne, basis cost and freight.

 

Delivery from the US Gulf region will be during the August 6-20 period and from the Pacific Northwest during the August 21-September 4 period.

 

Japan's agriculture ministry Friday bought 28,325 tonnes of food wheat in a sell-buy-sell tender for shipment between June and August.