July 5, 2012

 

Asian grain prices in upward trend in coming weeks

 

 

On the back of weather-driven supply risks to US crops, Asia's grain prices are poised for further gains in the coming weeks, but higher prices will likely keep spot demand low, keeping the rally in check.

 

On Tuesday (July 3), July corn at the Chicago Board of Trade rallied to its highest level since September 15, while July soy surged to their highest level since July 2008, as hot, dry weather in the US Midwest continued to threaten crops.

 

July CBOT corn settled 3.8% higher on Tuesday (July 3), at US$7.1875 a bushel, while December corn ended 2.9% higher at US$6.74/bushel.

 

The USDA's crop report, issued Monday (July 2), is supporting prices, a Singapore-based trader said, adding that corn may edge toward US$7.50 in the coming sessions.

 

In its weekly crop-progress report, the USDA said 48% of the corn crop was in good or excellent condition as of Sunday (July 1), down eight percentage points from a week earlier, and the lowest level for this time of year since 1988.

 

The USDA also downgraded its assessment of soy by eight percentage points on week, judging 45% of the crop to be in good or excellent condition.

 

July CBOT soy rose 2.6% to US$15.7225 a bushel, while November soy settled 2.4% higher at US$14.73/bushel.

 

Very high temperatures and limited thundershower activity in the Midwest will likely continue to affect reproductive corn and soy for another five days, meteorologists at Telvent DTN said Tuesday (July 3).

 

But even if temperatures moderate and rainfall improves somewhat over the coming weekend, it will be too late for corn crops that are already damaged, as they are in their most vulnerable pollination stage, Phillip Capital Futures said in a research note Wednesday (July 4).

 

CBOT markets will be closed Wednesday (July 4) to mark Independence Day.

 

Meanwhile, investors will be watching the European Central Bank's interest rate decision, due Thursday (July 5), as well as employment data from the US later this week to gauge the economic outlook, a second Singapore-based trader said.

 

But weather risks and fundamentals will be the key drivers for prices in the coming weeks, he said. Investors will also be watching out for USDA's world agricultural supply-and-demand estimate report, due July 11, for fresh cues, traders said.