September 14, 2009

 

Asia Grain Outlook on Monday: More downside; no bargain-hunting expected

 

 

Soybean and corn prices may fall further this week, taking cues from other markets, but that may not prompt more buying as most users, wary of further declines, are only filling their minimum requirement, traders and analysts said Monday.

 

Estimates of a higher output by the U.S. Department of Agriculture Friday, and worries that grain prices may get influenced by factors including a stronger U.S. dollar, are keeping buyers at bay, analysts said.

 

Reluctance to snap up more parcels comes even as a drought threatens the soybean and corn crop in China, one of the world's biggest producers, and prices may need to fall further to prompt traders to hunt for bargains. The increasing tendency to buy only what is needed is also making deals inelastic to rate fluctuations.

 

"Take Japan for instance, we have been buying corn steadily," and the price fluctuations haven't affected the pace much, said Genichiro Higaki, head of the proprietary fund management team at Sumitomo Corp. in Tokyo. "As these markets are net short on CBOT, so far I don't think" the prices offer bargain-hunting opportunities.

 

As Friday's USDA report didn't surprise the market much, grains are more likely to take cues from the overall financial market, analysts said.

 

"Corn and soybean are under pressure," and will be very vulnerable to a stronger U.S. dollar, said Koname Gokon, deputy manager at Okato Shoji in Tokyo.

 

The USDA Friday increased the 2009 projected corn yield to 161.9 bushels per acre, up from 159.5 bushels in August, but the new crop U.S. carryover came in at 1.635 billion bushels, below the average of analysts' estimates.

 

The USDA projected 2009 U.S. soybean production at 3.245 billion bushels, with a yield of 42.3 bushels per acre, and the output figure was below the average Dow Jones survey estimate of 3.256 billion, with yields just off the average estimate of 42.4.

 

Still, analysts such as Higaki "doubt" the USDA's estimate, calling the export and demand forecasts to be optimistic, and said "it is a little bit early," to make a call.

 

Separately, China's usual spike in consumption ahead of the week-long holiday in the beginning of October isn't visible, putting a question mark on demand, traders said.

 

Corn production in Jilin province, China's top grower, is likely to fall by as much as 30% this year because of a drought, the Futures Daily reported Monday, citing outcome from the latest field trip. Jilin last year accounted for 13% of the country's total output.