November 7, 2007

Asia Grain Outlook on Wednesday: Corn, soy prices surge on crude oil rally

Asian buyers may face higher offers for corn and soy as prices of the grains are swept up along with the record high prices of crude oil, said analysts Wednesday.

Inflationary buying and a weaker U.S. dollar also helped lift the prices of corn futures on the Chicago Board of Trade. The December contract rose 10 1/2 cents to US$3.85 3/4 a bushel.

Concerns over a possible fall in crop production, when the U.S. Department of Agriculture reveals corn output figures on Friday, fanned speculative buying and added to the upside.

"The energy bid is the main driver behind higher prices but the impact is all the greater because supply is tight," said Tobin Gorey, commodity strategist with Commonwealth Research.

"A big drop in oil prices would see a drop in grain and oilseed prices too," he added.

The corn and soy markets are likely to look for leads from outside markets prior to the release of fresh fundamental data in Friday's USDA crop reports, said analysts.

CBOT soybean futures rallied to three-year highs on inflationary buys and spillover strength from outside markets such as crude oil and crude palm oil.

November soybeans settled 23 3/4 cents higher at US$10.29 1/2 and January soybeans ended 23 1/2 cents higher at US$10.44 1/2. December soymeal settled US$7.70 higher at US$284.60 per short tonne. December soyoil finished 106 points higher at 43.62 per pound.

In China, the world's largest importer of soybeans, the National Grain and Oils Information Center lowered the country's soybean output forecast from a month ago by 400,000 tonnes to 14 million tonnes.