November 16, 2010

 

Asian grain cost to stay firm for a week

Asian grain prices may post mild gains after Friday's (Nov 12) sell-off but the market will likely remain rangebound this week, prompting some fresh buying in the physical market.

 

"Some Asian importers are cautious and prefer to wait and watch but there are still others who don't want to miss an opportunity to take advantage of the latest decline in prices," said a Singapore-based executive at a global trading company.

 

He said strong fundamentals haven't changed and prices may move higher rather than lower in the next few weeks.

 

Both upside and downside are limited for the time being, said Koname Gokon, deputy general manager at commodity brokerage Okato Shoji Co.'s research division.

 

He said there has already been considerable long liquidation in grain futures and most traders are unlikely to opt for fresh short positions.

 

Traders and analysts are expecting the March corn futures contract on the CBOT to mostly move between US$5.40 a bushel and US$5.70 a bushel for the next few days. The contract is currently around US$5.70.

 

They said unless there is some significant fresh Chinese buying of corn in the physical market, prices are unlikely to rise above US$6/bushel for the rest of this month.

 

In physical trade, South Korea has made several purchases in the past few days. On Friday (Nov 12) it snapped up at least five cargoes of corn and wheat totalling 275,000 tonnes, as CBOT futures fell.

 

Feedmill Group Friday (Nov 12) purchased three cargoes totalling 165,000 tonnes corn of US No. 3 or better quality grade amid a spate of private deals.

 

One cargo of 55,000 tonnes each has been purchased from Itochu, Cargill and Archer Daniels Midland at US$297/tonne, US$297.87/tonne and US$297.50/tonne, basis cost and freight, for arrival by March 15, March 10 and end-March respectively.

 

Itochu is likely to supply US origin corn and the other two companies' cargoes may be of optional origin, traders said.

 

Traders said Itochu also sold a cargo of 55,000 tonnes of US No. 3 corn to the Busan branch of the Korea Feed Association around US$297.50/tonne, c&f for arrival by April 10.

 

In wheat, traders expect the CBOT December contract to move in a US$6.70-$6.90/bushel range for the next few days. Prices are currently around US$6.72/bushel.

 

The Australian harvest has been delayed and affected by heavy rains in the east and dry weather in the west, but this has mostly been factored in the current price levels.

 

Buyers in Indonesia, Malaysia and Vietnam are making purchases on a regular basis but theirs is no dearth in supply and this is keeping a lid on prices.