June 26, 2012

 

Asia grain prices to expect volatility from macroeconomics

 

 

Asia grain prices will be buoyed by bullish fundamentals this week, but instability due to deteriorating macroeconomic conditions is also likely, said trade participants Monday (June 25).

 

Weather concerns boosted corn and soy prices Friday (June 22), pushing up futures on the Chicago Board of Trade. Forecasts for dry weather in the Midwest heightened concerns that the crops may not be able to develop normally. Friday's gains came on the back of a pullback in CBOT corn Thursday (June 21), as a gloomy world economy weighed.

 

CBOT July corn closed on Friday (June 22) 4 1/2 cents, or 0.8%, higher at US$5.91 a bushel. December corn, which represents supplies to be harvested this autumn, rose 4 cents, or 0.7%, to US$5.54 a bushel. July soy futures rose 4 cents, or 0.3%, to US$14.42 1/2 a bushel.

 

Singapore-based Phillip Futures analyst Lynette Tan said in a research note Monday (June 25) that she expects more volatility this week, particularly toward the end of the week as the front-month July CBOT agricultural futures will expire Friday (June 29).

 

"The challenge for investors and traders is to weigh mostly bearish macroeconomic influences with rather bullish grains and soft market fundamentals, arising from a declining crop outlook due to unfavourable weather."

 

Kaname Gokon, deputy general manager at Tokyo-based brokerage Okato Shoji Co., said trade participants are likely to focus more on weather, particularly if the conditions persist and can affect harvesting.

 

"If the situation doesn't improve in the next two weeks, we can expect prices to continue rising," he said.

 

Gokon tipped CBOT July corn to rise to US$6.20 a bushel this week, and December corn to hit US$6 a bushel by the next week if weather doesn't improve. As for soy, he said the July CBOT contract will likely hit US$14.90/bushel this week.

 

US weather concerns were also boosting grain futures elsewhere on Monday (June 25), before CBOT opened for trading.

 

Soy futures on the Dalian Commodity Exchange settled 1.9% higher, while DCE corn settled 0.7% up. European wheat futures also rose sharply Monday (June 25), with November Paris milling wheat surpassing a 12-month high.

 

CBOT grain prices were also rallying in electronic trading Monday (June 25), with July corn up 3.3% and July soy up 2.5% at 1000 GMT.

 

Spot trade has been slow in Asia with no tenders in South Korea and Taiwan last week, as prices are high, traders said.