July 19, 2012

 

Asia's grain prices likely to fall on profit-taking

 

 

Due to profit-taking, technical selling, and drought in the US Midwest, Asian grain prices may likely move lower in the next two days.

 

"A downward correction of US$0.10-0.15 [a bushel] won't be off the mark because investors will like to book profits around current high levels," a Singapore-based executive with a global commodity trader, said.

 

Near-month wheat, corn and soy futures on the Chicago Board of Trade are now trading around US$8.75, US$7.75 and US$16.31 respectively.

 

Unless there is yet another forecast for prolonged dry weather, investors will seek to liquidate at least some of their long positions, another trader in Kuala Lumpur said.

 

The US is bracing for an early corn harvest and actual physical supply may also lower prices, at least temporarily, he said.

 

In wheat, supply remains ample and prices are rising mainly due to the spill-over impact of corn and soy.

 

Availability of wheat from the Black Sea region is sharply lower than last year but arrivals are just starting to come in and it will be a while before supply dries up, an exporter in Ukraine's port town of Odessa said.

 

However, traders pointed out that the soy supply situation is critical and despite rising prices, there hasn't been any slowdown in demand.

 

"The US is currently selling and processing just as much soy at US$16 a bushel as it was at US$12," Karl Setzer, an Iowa-based analyst with MaxYield Cooperative, said.

 

Buyers in Taiwan are seeking wheat, corn and soy through tenders that close Thursday (July 12). The offers will provide the latest idea of price levels in the cash market.

 

In other news, Japan's agriculture ministry Wednesday (July 18) cancelled a simultaneous-buy-and-sell tender to buy 120,000 tonnes of feed wheat and 200,000 tonnes of feed barley due to a lack of buyers and sellers amid high prices, a government official said.

 

The United Nations Food and Agriculture Organisation (FAO), which traditionally takes an annual break from updating its monthly food price index in August, has decided to publish it next month due to a severe drought in the US and sharp price hikes, a senior FAO official said Wednesday (July 18).

 

"A lot of people want to know what is happening to the prices this month, so we have decided to update the index on August 9," Abdolreza Abbassian, a Rome-based senior economist with FAO, told Dow Jones Newswires.