September 3, 2012

Due to sluggish demand as a result of near-record prices, Asian corn prices are likely to meet limited upside, despite one of the worst droughts on record in the US.

In Asia, spot trade of the commodity has been slow in the past week, as prices are far too high for active purchasing, said traders in South Korea, the world's third-largest importer of corn.

Kaname Gokon, deputy general manager at Tokyo-based brokerage Okato Shoji, said September corn on the Chicago Board of Trade is likely to face strong resistance at US$8.20 a bushel, with gains mainly spurred by short-covering. December corn will likely move around US$8.05/bushel next week, he said.

On Thursday (Aug 30), CBOT September corn rose US$0.0125 to US$8.1150 a bushel, while December corn fell US$0.05, or 0.6%, to US$8.0850 a bushel.

Also weighing on prices is US corn output in the marketing year that begins September 1, which may exceed government projections of around 273 million metric tonnes, with many growers indicating higher yields despite a dry spell, a senior industry official said Wednesday (Aug 29).

After interacting with growers, there are indications that yields are much higher than was feared due to the severe drought, Julius Schaaf, vice chairman of the US Grains Council, said on the sidelines of an agriculture conference in Phuket, Thailand.

"A small crop has a long tail, and we may have output above earlier projections, though many areas in Kansas, Missouri and southern Illinois are badly hit by drought," Schaaf said. His private organisation, including producer organisations and agribusinesses, develops export markets for US crops.

The price of corn, which recently hit a record high, has almost peaked, though it may not fall dramatically and could hover around current levels because of the overall decline in production, he said.

Near-month corn futures on the Chicago Board of Trade hit an all-time high of around US$8.43 a bushel last month.