August 5, 2008

 

CBOT grains expected to decline more as grain demand slows

Grains futures traded at the Chicago Board of Trade are likely to slide more over the next few weeks on slowing global demand and expectations of ample supply, analysts said Tuesday (Aug 5, 2008).

 

CBOT's September corn contract traded at US$5.24 a bushel at 0515 GMT, down 28.5 percent  since July 1. The CBOT September soy contract traded at US$12.60/bushel, down 23 percent since July 3, and CBOT September wheat was at US$7.55/bushel, down 22 percent since June 26.

 

"China has really reduced soy imports...they had imported a lot of soy ahead of the Olympic Games," said Kazuhiko Saito, a strategist with Tokyo-based Interes Capital Management Co.

 

China is the world's biggest soy importer. Over the past two weeks, its soy imports have fallen to 1-2 cargoes a week from 10 cargoes or more a week in June and early July.

 

The Chinese market is awash with soy and vegetable oils, which is exerting pressure on Dalian Commodity Exchange soybean and soyoil futures.

 

The demand picture for corn is bleak, too.

 

"US gasoline demand has been hit by high crude prices. As people drive less, ethanol demand too is suffering," Saito said.

 

A USDA report due next Thursday is likely to project high corn stocks in the US, which will keep prices bearish, analysts said.

 

Kenji Kobayashi, an analyst with Tokyo's Kanetsu Asset Management Ltd. said corn and soy futures prices at the CBOT seem certain to keep falling at least until Aug. 15.

 

Corn futures may find near-term support at around US$5/bushel, while soy could see some support at US$12/bushel, he said.

 

While fund liquidation is taking place in grains because of the global credit crunch, Koyayashi said, the long-term value of investing in commodities remains intact.

 

Food-grade wheat futures are following corn contracts lower at the CBOT, while a large potential wheat crop in Australia and Europe is also damping sentiment, said John Reeve, associate director of agricultural commodities at UBS AG (UBS) in Singapore.

 

Corn and feed-wheat crops in Europe are looking good, which will further pressure the prices of these commodities, Reeve added.