September 30, 2010

 

Asian grain prices may fall on profit-taking

Asian corn and wheat prices may ease slightly during the rest of the week due to profit-taking in the futures markets, but overall fundamentals remain strong.

 

Grain markets are headed for a brief downward correction because many investors are closing long positions ahead of the monthly settlement of accounts, said a Singapore-based executive with a global trading company.

 

The December corn futures contract on the CBOT ended US$0.12 3/4, or 2.5%, lower Tuesday (Sep 28) at US$5 a bushel. The CBOT December wheat futures contract closed US$0.21 3/4, or 3%, lower Tuesday (Sep 28) at US$6.84 3/4 a bushel.

 

The Russian drought is no longer a factor influencing wheat prices, which may decline further early next month, said a Tokyo-based grain importer. Most traders and analysts expect wheat prices to fall towards US$6.5 a bushel in the next few days, but cautioned that the decline may be temporary.

 

"While it is true that wheat prices have declined below US$7, we are not out of the woods yet," said Abdolreza Abbassian, Secretary, Intergovernmental Group for Grains in the UN's Food and Agriculture Organization. He said a lack of feed grains such as wheat has pushed up the demand for corn and boosted its prices.

 

Even though corn prices are showing resistance at US$5 a bushel, any rebound will push up wheat prices too. Traders expect corn prices to test US$4.85 a bushel before recovery.

 

Many Asian buyers in countries such as Japan and South Korea are keeping to the sidelines, expecting a downward correction.

 

"Prices are volatile and buyers are uncertain about near-term direction. The strategy is to buy on price dips," said a corn importer in Seoul. He said the strengthening of the US dollar against major Asian currencies has also pushed up prices.

 

The prices of corn have moved up to their highest level in two years.

 

"Without fresh bullish fundamental input, a period of consolidation is likely," Rabobank said.

 

However, it also said fundamentals remained strong and that there was a bullish bias in prices. Rabobank said CBOT corn prices may average around US$5.25 a bushel in the next quarter, up from US$4.16 during the July-September period.