December 16, 2010

 

Asian grain prices may lower on technical selling

 

 

Grain prices in Asia will likely decrease in the next few days on the back of technical selling and profit-taking amid strong overall fundamentals, trading executives said Wednesday (Dec 15).

 

"The recent (unseasonal) heavy rains in eastern Australia have mostly been factored in and further gains in wheat prices are unlikely unless any more damage to the crop is reported," said a Singapore-based executive with a global trading company.

 

He added that the large volume of Australian wheat being downgraded to feed category also implied that it will now compete with corn.

 

Traders said this may be negative for corn prices to some extent.

 

"We are very much interested in Australian feed wheat," said a Seoul-based importer.

 

He said buyers are seeking detailed information on specifications for Australian feed wheat and may purchase some cargoes, if viable when compared with corn prices.

 

The most active March wheat futures contract on the CBOT is currently trading around US$7.62 a bushel and the corresponding corn contract around US$5.85 a bushel.

 

"The spreads between corn and wheat futures, which had narrowed in October due to a surge in corn prices, has widened again," said an analyst at a Singapore-based commodities brokerage.

 

He added that this reflects the potential for feed wheat to substitute corn again in north and southeast Asian destinations.

 

Year-end profit-taking and technical selling are also weighing on prices.

 

Traders said grain prices are unlikely to fall much due to the tight supply situation, but they will nevertheless be under some downward pressure.

 

Most analysts and traders put immediate support for the CBOT March wheat futures contract at US$7.50 a bushel and for corn at US$5.70 a bushel.

 

They said the recent highs above US$8 a bushel and US$6 a bushel for wheat and corn, respectively are unlikely to be retraced again for the next two weeks.

 

In other news, Japan is seeking Australian wheat for the first time in almost a month. The tender seeking 71,563 tonnes of Australian food wheat for shipment between Jan. 21 and Feb. 20 in two cargoes will likely be finalised Thursday (Dec 16).

 

Australia's production of noodle-making wheat has been affected by a severe drought this year in the west.

 

Western Australia's Minister for Agriculture, Food and Forestry, Terry Redman said last week's talks are on with Japanese buyers to ensure adequate supply of the grain.