Asia grain buyers monitor US frost; opt for sidelines now

Grain buyers in Asia are monitoring US forecasts of an approaching frost and the possible implications it could have on the country corn and soy crops, though the market may have to show further signs of an imminent prolonged rally before buyers step up imports, observers said Wednesday (September 16).

Analysts said a weather forecast suggesting that the US key-producing midwest region may face frost as early as next week was enough to give the market the initial push, while the rally accelerated as contracts climbed above key technical points, causing speculators to scramble to cover short positions.

"It appears corn may have turned the corner and may move higher, but last night rally was primarily due to short covering - I don't expect to see buyers rushing back to the market after a spike like that," said a Taiwan-based agent for a major Japanese grains trading firm. "People are waiting to see what happens next."

"In fact, I think buyers may be pretty scarce for the next few days, though if corn prices show signs of moving up to the US$3.70/bushel level, (they) could panic and jump back in," he said.

Observers in Asia said the overall fundamental outlook for the grains complex remains mixed.

"Despite the frost talk, there are still general expectations of good US wheat and corn harvests, though corn maturity is lagging behind somewhat for this time of year," said Koname Gokon, a commodities analyst with Okato Shoji Co.

"On top of that, there are good overall expectations surrounding soy harvests in the US and South America this year, but an overall bullish outlook for demand - with China imports likely to pick up again in the coming weeks," he said.

Meanwhile recent worries surrounding Australia dry weather and implications it could have for the country approaching wheat harvest also appear to be easing, Gokon added.