August 3, 2010

 

High prices may slow down grain buying in Asia

 

 

Asian grain imports are likely to slow down this week amid cautious buying and rise in prices, according to trade participants.

 

They said current price levels are considered too high and are likely to keep buyers on the sidelines. "The attitude of buyers is currently 'wait and watch,' and they expect a downward correction soon," said a Tokyo-based executive at a global trading company.

 

He said apart from recent weather-related concerns, it is speculators who are jacking up the prices, but the market may have peaked for the time being and a correction is due.

 

The nearby September wheat futures contract on the Chicago Board of Trade, a benchmark for global prices, climbed more than 5% Friday (Jul 30) to a fresh 13-month high of US$6.63 a bushel. Traders expect prices to fall below US$6.50/bushel again this month.

 

Higher wheat prices have also pushed up corn futures, and this has slowed down physical trade in Asia. Importers in South Korea and Taiwan are reluctant to issue tenders at current price levels.

 

CBOT September corn futures ended up 13 1/2 cents or 3.6% Friday at US$3.92 3/4 a bushel and December corn closed up 13 cents or 3.3% at US$4.06 3/4.

 

Japan is yet to purchase around 2.6 million tonnes of corn for October-December shipment, but imports are now sluggish due to high prices. "There is at least a US$6-US$8/tonne gap in price ideas of buyers and sellers and therefore many importers prefer to wait and watch," said a Tokyo-based executive at a global trading company.

 

He said US corn on a delivered basis is currently being offered to Japan around US$238/tonne, while buyers are looking at rates of US$230-US$232/tonne. South American corn is offered around US$245/tonne.

 

Traders said of Japan's total October-December corn import requirement of around 4.1 million tonnes for both feed and food, the purchase of only 1.5 million tonnes has been finalised so far.

 

They said for a feed requirement of three million tonnes during the same period, close to 1.1 million tonnes has been purchased. Traders expect prices to decline over the next two weeks and therefore are not in a hurry to buy.

 

Prices are unlikely to stay so high and CBOT December corn may fall towards US$3.80/bushel, said an importer in Japan. Buyers in South Korea and Taiwan are also expecting a downward correction.