November 1, 2011
Asian grain prices to face downward pressure
As investors move funds to currency markets amid stronger US dollar, Asian grains prices are likely to be decreasing this week on long liquidation.
According to Dow Jones, most traders expect prices of wheat, corn and soy on CBOT to fall as much as US$0.20 a bushel in the next few days.
The near-month CBOT November soy contract is currently trading around US$12.17/bushel. December contract for wheat and corn is around US$6.44/bushel and US$6.55/bushel respectively.
The stronger US dollar is weighing on grains prices and the trend may continue this week, said the deputy general manager at Japanese commodity brokerage Okato Shoji Co.
The US is the world's largest exporter of agricultural commodities and since a stronger dollar makes exports more expensive, it is usually followed by a fall in prices.
Speculative funds have also liquidated commodities positions over the past few days, including grains, to invest in currencies, a broker in Singapore said.
As the near-month soy contract on CBOT is due to expire by mid-November, many traders are closing their positions, the manager said.
Traders said that in the grains complex, wheat will be under more downward pressure than corn, due to ample supply in the physical market. Corn is selling at a premium over wheat on CBOT.
Those investors who sold corn and bought wheat in recent weeks are now taking profits.
In soy, physical demand has picked up due to fall in prices and harvest pressure in the US.
A South Korean food processor has purchased two cargoes totalling 110,000 tonnes of soy for arrival by end-January and February 20, trading executives said Monday (Oct 31). One cargo is of Brazilian and the other US origin, they said.
Nevertheless, some analysts are bullish for the medium term.
Soy demand is structurally robust, and firmly underpinned by macroeconomic factors, including rising per capita GDP, growing urban populations in low- and middle-income countries and the rising demand for meat, particularly in China, Standard Chartered said in a report.
"We recommend going long on March CBOT soy futures contract at the current price of around US$12.25/bushel, with the view of reaching a target of US$13.50/bushel," it said.
South Korean flour mills have purchased a cargo of 42,700 tonnes of Australian wheat for January shipment.
The mills purchased 39,000 tonnes Australian Standard White wheat at around US$264/tonne, free-on-board and 3,700 tonnes Australian Hard wheat at US$296/tonne, FOB.