July 26, 2012

 

Asian grain buyers make small purchases as prices come off high

 

 

Grain prices have lowered from its peak after a strong bull run, inviting Asian grain buyers to make modest purchases in the next few days, trade participants and analysts said Monday (July 23).

 

Recent forecasts for rain in the US, which is reeling under a severe drought, and technical selling for profit-taking brought prices down after several days of gains.

 

Fundamentals are still very strong and another rally is expected this week, but some cash buying will still take place as prices are off highs, traders said.

 

On Friday (July 20), near-month soy and corn for August and September delivery on the Chicago Board of Trade hit a record high of US$17.7775 a bushel and US$8.2875/bushel, respectively. September wheat hit a four-year high of US$9.4725 Monday.

 

The three contracts are now trading around US$16.65, US$7.98 and US$8.90.

 

Cash purchases are unlikely to be significant, as prices have fallen only a tad, but those who need to cover for the next two months "have no option but to step in," a Singapore-based executive with a global trading company said.

 

As Asian importers have been on the sidelines for several weeks now, pent-up demand will slowly become visible, he added.

 

Japan is now making small volumes of feed-grade corn purchases for the October-December period, Continental Rice Corp. President Nobuyuki Chino said. Most purchases are from Brazil as its corn is the cheapest at the moment, Tokyo-based Chino said.

 

Traders said it is at least US$30/tonne cheaper on a delivered basis at East Asian ports for October-November shipment.

 

Taiwan's Maize Industry Procurement Association Wednesday (July 25) purchased 60,000 tonnes of Brazilian corn from Glencore for Oct. 11-25 shipment to a single port, cost and freight, at a premium of 71.9 US cents a bushel to the CBOT December contract, or about US$336.30/tonne, executives said.

 

The downward correction in futures has been slow to trickle down to the cash market. Due to tight supply, it is difficult to get US corn below US$370/tonne, C&F for arrival in South Korean ports in December, an importer in Seoul said.

 

South Korea's flour millers were active Wednesday, buying some wheat from Australia and the US

 

Three companies together bought US Soft White wheat with 8.5% and 9.5% protein around US$322/tonne; Hard Red Winter with 11.5% protein around US$352/tonne; and Dark Northern Spring with 14% protein around US$385/tonne, all free on board, traders said.

 

Another group of two mills passed on a tender for the same grades as the lowest offers were above their expectations, around US$342, US$362 and US$391/tonne, FOB, respectively.