December 8, 2011
With poor weather in South America helping the complex to gain a little and a couple of investment houses turning bearish on the complex, grains trade in Asia is expected to be relatively slow this week.
"The overall tone for the market is bearish, but I think there may be some slight upside for grain futures this week due to erratic weather in South America," Tokyo-based Okato Shoji deputy general manager Kaname Gokon said.
Forecasts for dry weather in South America are casting uncertainty about the soy crop, lending support to prices.
Still, any "upside will be limited as concerns about the [US] export data linger," he said.
Bellwether Chicago Board of Trade corn futures will likely hit resistance at US$0.06 a bushel--half a cent from their last close, he said. January soy will likely hit a ceiling at US$11.50 a bushel, while December wheat will likely trade in range in the US$6-6.20-a-bushel zone.
March CBOT corn closed up 5.5 cents at US$5.96 1/2 as slow farm gate sales countermanded the developing bearish demand-side picture.
Soy for January delivery ended up 3.25 cents at US$11.29 1/2 a bushel and December wheat ended flat at US$5.98 3/4.
Japan, the world's biggest corn importer, has bought around 700,000 tonnes of European feed-grade corn for January-March shipment, or more than 20% of its quarterly needs, to cut costs amid higher US prices, trading executives said Tuesday.
This is one of the biggest ever purchases of European corn by Japan in any quarter.
Japan typically buys US corn, but Eastern and Central European countries have harvested a bumper crop and their price offers for delivery to East Asia destinations are up to US$25/tonne cheaper.
ING Investment Management, which has been overweight agricultural commodities for most of this year, has scaled back its weighting for the sector to neutral after weather patterns and crop yields improved.
Although a renewed La Nina weather phenomenon could skew this to the upside, ING "isn't enthusiastic on agricultural commodities yet," senior strategist Koen Straetmans said.
Credit Suisse said also Tuesday that the outlook for agriculture markets has deteriorated, as harvests have come in better than expected and long-term technical trends have turned negative in many markets.
Analysts at the bank said they are negative on most prices as agricultural markets aren't good value after mostly rallying earlier this year amid concerns over supply.
It said corn prices need to fall below US$5 a bushel to trade at fair value, although it said this isn't likely soon--its three-month forecast is for US$5.70/bushel while its 12-month outlook is for US$5.40/bushel.