November 30, 2010

 

Russian imports, strong demand to hold up Asian grain prices

Asian grain prices are likely to move higher this week due to concerns that Russia might start to import feed grains, dry weather in major planting areas of the US and strong demand in the physical market.

 

Traders and analysts expect the March corn futures contract on the CBOT to rise to US$5.70 a bushel from around US$5.58/bushel in the current electronic trading session, January soy to move above US$12.50/bushel from US$12.46/bushel, and December wheat to rise past US$6.60/bushel from US$6.56/bushel.

 

Physical trade in grains seems to be picking up again at current price levels, said Koname Gokon, general manager at commodity brokerage Okato Shoji Co.'s research division.

 

Japan – one of Asia's largest importers – will soon start tendering for February shipments of wheat, having already covered the government's needs for December and January.

 

The country's agriculture ministry is also seeking 33,000 tonnes of food wheat and 9,000 tonnes of malting barley for shipment by February 10 in a sell-buy-sell tender on behalf of local companies that will close Tuesday (Nov 30), and 30,000 tonnes of feed wheat and 200,000 tonnes of feed barley for shipment by February 20 in an SBS tender that will close Wednesday (Dec 1).

 

Buyers in South Korea are expected to tender for several cargoes of corn later this week for March shipment.

 

Bangladesh is seeking 50,000 tonnes each of wheat and white rice in tenders that will close on December 6.

 

Asian traders said prices have eased in the past two weeks in anticipation of further monetary tightening and other measures to limit speculation and price increases in China, monetary controls, which may curb speculative activity in other regional commodities markets as well.

 

Current prices are relatively attractive to those looking to lock in physical purchases, they said.

 

Last week, Malaysia purchased a Panamax cargo of 55,00-65,000 tonnes of South American corn for January shipment around US$292/tonne, on a cost-and-freight basis.

 

The Korean Corn Processing Industry Association purchased a cargo of 48,000 tonnes of US No. 2-or-better grade optional-origin corn Wednesday (Dec 1) at US$288.10/tonne, C&F, for April arrival.

 

Russia's ban on grain exports pushed prices up sharply in August, and now there are indications that they may even have to import feed grains such as corn and barley, a Singapore-based executive at a global trading company said.

 

While such purchases would likely be mostly from neighbouring Ukraine, they would further tighten global supply, traders said.

 

Meanwhile, dry weather in the US has affected the winter wheat plantings, which is also bullish for prices, they said.

 

The global grain supply situation will remain tight heading into next year, Okato Shoji's Gokon said.