October 12, 2010

 

Asian grain trade to ease on soaring corn futures

The physical grains trade in Asia is likely to slow this week as prices rally on the back of surging futures, traders in the region said Monday (Oct 4).

 

CBOT December corn ended Friday up 30 cents, or 6%, at US$5.28 1/4 a bushel after hitting the daily limit-up level, which then led to early gains of 45 points, or 8.5%, in early Asian trade Monday. March corn closed Friday up 30 cents at US$5.37 1/2.

 

Corn's rally was sparked by the USDA report issued Friday, which cut the projected 2010 yield by 4% to 155.8 bushels an acre. The agency estimated that stocks as a percentage of usage next year would dip to its lowest level in 15 years.

 

CBOT soy futures also soared on indications from the USDA of tighter supply. Prices hit the market's 70-cent daily trading limit on Friday, and gained as much as 4.4% in electronic trade on Monday.

 

Traders expect the run-up in the futures market to slow trade in the physical grains market after heavy buying in the last three weeks when prices had eased.

 

"Everybody is shocked right now, I don't think the market will be active at current market values. There is no way for buying to take place at the current market values - this is not just in Korea, but also in Japan, Taiwan," said a Seoul-based international trading firm executive.

 

Physical corn prices have likely risen US$30 a tonne from last week's pre-rally levels, he said.

 

South Korea has bought at least seven cargoes of corn with a total of around 385,000 tonnes from late September to October 6 at prices between the range of US$269-$286/tonne, cost and freight.

 

The country had planned to buy more for December-January shipment, but traders are likely to be on the sidelines this week.

 

South Korea is Asia's largest importer of corn after Japan, where markets were closed for a public holiday Monday.

 

In Taiwan, buyers are also expected to be on the sidelines this week as they have covered grain requirements through the Lunar New Year in February 2011, after buying actively in the past few weeks, a trader said.

 

"The futures market is bullish now as the US dollar is weak, and fundamentals are strong, so there may be more upside," he said.