October 4, 2012

 

Asian grain prices set to recover sufficiently after sharp decline

 

 

After declining sharply in recent weeks, Asian grain prices are set for a modest recovery.

 

The on-going harvest in the US, the world's largest exporter of agricultural commodities, is ahead of schedule and is increasingly expected to exceed earlier projections, though it will still be sharply diminished on year, trading executives and analysts said Wednesday (Oct 3).

 

The near-month soy futures contract on the Chicago Board of Trade, which hit a record US$17.9475 a bushel on September 4, has tumbled since. The November contract traded as low as US$15.04/bushel on Wednesday.

 

Corn has traded below US$7.50/bushel from a record of US$8.4375/bushel on August 10, while wheat is around US$8.58/bushel, down from a multiyear high of US$9.4725/bushel reached on July 23.

 

Traders and analysts now expect prices to recover by up to US$0.20 a bushel. Prices, particularly of corn, are expected to rise again following this correction, said Hiroyuki Kikukawa, general manager for research at Nihon Unicom in Japan.

 

US corn inventories are at their lowest since 2003-04 and soy stocks are down 21% on-year, said Karl Setzer, an Iowa-based analyst with MaxYield Cooperative.

 

Demand for US soy has not slowed and the decline in futures prices will not help reduce consumption, Setzer said.

 

Recent declines in grain and oilseed prices have sparked interest in the cash market as buyers seek to meet their requirements for shipment in January and February and this is expected to support the market again, a Seoul-based trading executive said.

 

Corn prices have declined by around US$40/tonne in the past month. Optional-origin corn for January shipment is now offered around US$295-300/tonne, cost and freight (C&F), at East Asian ports, trading executives said. They said corresponding offers for feed wheat are near US$335/tonne, C&F.

 

Japan, Taiwan and South Korea together bought more than a million tonnes of wheat, corn and soy last month. The Taichung branch of Taiwan's Breakfast Soybean Procurement Association is seeking up to 180,000 tonnes of soy in a tender that closes Thursday (Sep 27).

 

The association is seeking soy for shipment from the US Gulf of Mexico or Brazil for shipment during December 11-25, January 11-25 and February 6-20, the executives said.

 

Japan's agriculture ministry on Wednesday issued a simultaneous-buy-and-sell tender seeking 120,000 tonnes of feed wheat and 200,000 tonnes of feed barley for bulk shipment by January 31, an official from the Ministry of Agriculture, Forestry and Fisheries said. The tender closes October 10, the official said.