September 21, 2010

 

Asian grains to cost higher this week

Asia's grains prices will likely edge up this week amid strong demand, lower-than-expected US harvest and dry weather in Brazil.

 

Last week, traders and analysts in Vietnam painted a bullish price outlook for most grains, including corn, which is now at its highest level in two years.

 

The US is on track to produce a record corn harvest this year, surpassing last year's all-time high, but strong output is unlikely to prevent global prices from rising to a fresh two-year high of US$5.50 a bushel in the next few months as demand remains strong, said William Olthoff, president of Dutch Valley Growers Inc., an Illinois-based marketing cooperative.

 

"The strength in corn prices is being derived from demand rather than supply," Olthoff said. There will be frequent spikes in prices at regular intervals toward US$5.50/bushel, supported by strong demand in key markets.

 

Corn for delivery in December was at US$5.23/bushel in electronic trade at the CBOT at 0703 GMT, up 2% compared with Friday's (Sep 17) CBOT settlement and more than 50% higher than late-June levels.

 

Traders said South Korea has snapped up at least 10 cargoes of optional-origin corn totaling around 550,000 tonnes this month for shipment in November, aggressively locking in supplies amid a rise in global prices.

 

Japan's feed corn requirements for the next quarter are around 3.1 million tonnes, of which 2.6 million tonnes have been purchased so far. But final pricing has been done for barely 300,000 tonnes, at US$260-$265/tonne, and the rate will be much higher for the rest due to the latest price spurt.

 

Corn prices will need to strengthen to ensure farmers don't switch acreage to wheat next year, said Thomas Mielke, editor-in-chief of Oil World, a Hamburg-based publication on oils and fats.

 

Most analysts say soy prices are also well supported.

 

"Demand in countries such as Mexico, Japan, China and Indonesia is strong, and prices will mostly move between US$10 and US$11/bushel for the rest of the year," said Randy Mann, vice-president of the American Soybean Association.

 

November soy were trading at 10.925 a bushel at 0712 GMT on e-CBOT, up 2.2% compared with Friday's (Sep 18) settlement and 23% higher since early June.

 

Mann said US growers have already made several export sales at prices between US$10 and US$11 a bushel ahead of the harvest, which is expected to start in less than three weeks.

 

However, Mielke said the current large global stockpile of around 68 million tonnes of soy, up 51% on year, may weigh on prices – though dry weather in major producing region, Brazil, is supportive.