October 5, 2010

 

Asia grain prices fall amid abundant stocks

Due to ample supplies and a sharp fall in futures prices, Asian corn and wheat prices are likely to be under downward pressure in the next few days.

 

"Higher-than-expected stocks of corn and wheat in the US have given investors an excuse to liquidate long positions, bringing prices down," said a trader in Seoul. Prices will likely remain subdued for a few days.

 

December corn futures on the CBOT ended US$0.30, or 6.1%, lower Friday (Oct 1) at US$4.65 3/4 a bushel. Prices tumbled further during Asian trading hours Monday (Oct 4).

 

CBOT December wheat futures contract settled US$0.19, or 2.8%, lower Friday (Oct 1) at US$6.55 a bushel and extended losses during electronic trade Monday (Oct 4).

 

Most traders now expect corn to test US$4.40 a bushel and wheat to target US$6.30 a bushel.

 

"The market is in a bearish tone and this may continue for some more time. The weather in the Midwest region of the US isn't affecting the harvest momentum and supply is ample," said Koname Gokon, deputy general manager at commodity brokerage Okato Shoji Co.'s research division. He said the harvest pressure in the US was dragging down grain prices.

 

Another trader said many importers in Asia are awaiting a further decline in prices. However, not everyone agrees that the downside pressure will sustain. Some analysts and traders cautioned that prices may have already bottomed out.

 

"The current market level is an excellent opportunity for importers of both wheat and corn to lock in their prices," said a Singapore-based executive at a global trading company.

 

He said the latest round of declines was more of a technical correction than a turnaround in the supply situation. Corn buyers in Japan and South Korea are already taking advantage of the decline in prices and have finalised a few deals.

 

The Busan branch of the Korea Feed Association (KFA) purchased a cargo of 55,000 tonnes of corn in a tender, for arrival by Jan. 20. KFA purchased the cargo last week at US$285.95/tonne, on a cost-and-freight basis, from global trading company Noble Resources.

 

South Korea's largest feedmaker, Nonghyup Feed Inc. or Nofi, has purchased two cargoes of optional-origin corn totaling 110,000 tonnes in a tender, for arrival by December 15 and February 10.

 

Nofi purchased one cargo at US$0.226 over the December contract of the CBOT, and the second at US$0.201 over the March contract, c&f basis, last week. "South Korea may buy 3-4 more cargoes in the next few days," said a Seoul-based grain broker.

 

Japan plans to resume purchases of food-grade wheat Tuesday (Oct 5) after a gap of two weeks. It has mostly covered its needs for November shipment, having purchased 415,000 tonnes last month, and will now seek cargoes for December.