Grain traders in Asia may step up buying on price fall

Asian grain importers are likely to step up their purchases this week to take advantage of the recent fall in global prices, but this may provide only mild support to the market, according to trading executives and analysts.

 

Overall fundamentals remain weak due to favourable weather, which has given a filip to the crop plantings in the US, they said.

 

December corn futures on the Chicago Board of Trade closed 1/2 cent higher Thursday (Jun 3) at US$3.70 1/4 a bushel. November soy rose 16 1/4 cents, or 1.8%, to US$9.19 3/4. July wheat contract ended 3/4 cent, or 0.2%, lower at US$4.41 3/4 a bushel.

 

"Recent gains in corn and soy are mainly on technical buying and not indicative of strong fundamentals," said a Tokyo-based trading executive.

 

However, he said the overall decline in prices over the past few weeks has encouraged buyers to explore more buying possibilities. He said the nearby CBOT July contract has already declined below US$3.50/bushel, losing close to 25 cents in a week, and it is indicative of a bearish trend.

 

Physical buyers who were on the sidelines until now may make purchases next week, said a trader in Seoul.

 

Some companies such as Nonghyup Feed Inc (Nofi), South Korea's largest feedmaker, are already active in the market. Nofi bought two 55,000-tonne cargoes of US corn and a cargo of feed wheat Friday (Jun 4).

 

It purchased one cargo of US No. 3 corn on a cost and freight basis from Archer Daniels Midland at 193.68 cents/bushel over the CBOT December corn futures contract. The shipment is for arrival by October 15. It purchased a cargo of US No. 2 corn from Noble at 198 cents over the December CBOT corn futures contract. The cargo is for shipment by October 25.

 

Nofi also bought a 55,000-tonne cargo of feed wheat from Noble at US$199.95/tonne on a cost and freight basis, for arrival by October 10. The second and third port unloading charges are US$1.50/tonne each.

 

Traders said there is a possibility the feed wheat may be supplied to Nofi from Ukraine.

 

They said buyers in Southeast Asia are keen to cover their September and October requirements at current price levels but are not in a hurry to make purchases for November as they expect prices to decline even further.

 

"South America's bumper harvest and excellent plantings in the US have together made the outlook bearish and turned grains into a buyers' market," said a Singapore-based commodities analyst. He said the strengthening dollar has also led to some liquidation of positions by institutional funds in grains futures and investment in currency and treasury markets.