August 16, 2012

 

 

Due to strong demand in the cash market, continued buying in the futures markets and persistent severe drought in the US, Asian grain prices are expected to rise through the rest of this week.

 

Traders and analysts expect near-month wheat, corn and soy futures contracts on the Chicago Board of Trade to gain at least US$0.10 a bushel each in the near term.

 

The contracts are currently trading around US$8.40, US$7.89 and US$16.30 a bushel, respectively.

 

Soy is likely to rise the most because the US soy harvest will not be available for shipment until October, resulting in depleted inventories, an importer in Jakarta said.

 

Meanwhile, sales of South American soy from the previous harvest have almost ended, said Freddy Pranteda, a Buenos Aires-based broker with Cosur SA.

 

The CBOT September soy contract is trading at a premium of more than US$0.20/bushel to November. The premium signifies the tight near-term supply and is likely to be sustained or widen through the end of the month, said Kaname Gokon, deputy general manager at Tokyo-based brokerage Okato Shoji.

 

Technical charts indicate that September soy futures may even test US$16.85/bushel, he said.

 

Demand for corn has declined due to high prices but this isn't as likely to happen with soy, said Karl Setzer, an Iowa-based analyst with MaxYield Cooperative. In contrast to soy, many grains can be substituted for corn, especially in animal feed, he said.

 

The USDA Friday (Aug 10) lowered its forecast for US soy inventories for August 31, 2013, by 12% to 3.13 million tonnes. The low stocks are of even greater concern because Argentina and Brazil, major soy producers, also suffered from serious drought that hurt soy output this year.

 

"In all likelihood, US soy reserves will all but be depleted by late spring unless the country restricts exports," Setzer said.

 

In corn, tight US supply has been partly offset by additional exports from other countries and through the substitution of wheat. In the cash market, Taiwan is seeking a cargo of US wheat in a tender that closes Friday (Aug 10). Japan is seeking US wheat in a Thursday (Aug 9) tender.

 

In other news, South Korea's feed millers have purchased two cargoes totalling 16,000 metric tonnes of Indian rapeseed meal for shipment in September, trading executives said. The Korea Feed Association bought 10,000 tonnes for September 1-20 shipment from Starcom Resources at US$378.50/tonne, basis cost and freight, the executives said.

 

The country's largest feed miller, Nonghyup Feed Inc., bought 6,000 tonnes from Adani Enterprises at US$379.95/tonne for September 6-25 shipment, they said. There is an additional charge of US$2/tonne each for unloading part of the cargo at second and third ports.