November 23, 2010

 

Asian grain prices to rebound this week

Asian grain prices are expected to stage a marginal recovery over the next few days and regain some of the losses recorded during a sharp downward correction so far this month.

 

Corn, wheat and soy futures have been steadily declining in recent weeks after climbing to two-year peaks during the August-October period.

 

Traders and analysts expect prices to remain broadly subdued this week, but short covering could bring mild gains.

 

"The market will probably find a consolidation price point very soon and then look to gradually move higher again. Technical analysis indicates that prices fell this month because they had to retreat and fill in the gaps created when the market jumped up in October," said Jay O'Neil, Senior Agricultural Economist at Kansas State University.

 

At 0736 GMT, the March corn futures contract on the CBOT was US$0.0925 higher at US$5.44 a bushel. Most traders put immediate resistance at US$5.50/bushel.

 

A technical rebound may push up the prices even though the overall tone is bearish for the medium term, said Koname Gokon, general manager at commodity brokerage Okato Shoji Co.'s research division.

 

CBOT March corn futures are expected to trade mostly in a range of US$5.20-$5.50/bushel this week, he said.

 

In physical trade, the decline in prices this month has prompted importers to call in tenders and lock in supply.

 

Japan's corn buying is quite steady at current levels and importers are making purchases at less than US$2.80 over the CBOT March contract, said a Tokyo-based importer.

 

Of Japan's corn import requirements of 3.2 million tonnes for January-March shipment, close to 1.8 million tonnes has been purchased so far.

 

In South Korea, major feedmillers and food processors have stepped up corn purchases following the downward correction.

 

On Thursday (Nov 18), the Korea Corn Processing Industry Association bought a cargo of 55,000 tonnes of US No. 2 or better grade corn from Louis Dreyfus at US$288/tonne, c&f.

 

Analysts said it is an appropriate time for buyers to cover their requirements because the previous price rally has run out of steam but another one is lurking around the corner.

 

Inventory levels of wheat, corn and soybeans are low, and after the price consolidation there will still be a lot of nervousness about the need to raise output next year, said O'Neil.

 

"If I were an end user, I would get some forward needs covered, I would start buying now," he said.

 

Long liquidation by both institutional funds and speculators has dragged down prices but supply-demand fundamentals are strong, traders said.

 

CBOT December wheat contract prices are likely to move in a narrow range of US$6.40-$6.70/bushel this week, while January soybeans are likely to find support and resistance at US$12.00 and US$12.30/bushel, respectively, they said.