January 15, 2010


Asia Grain Outlook on Friday: Corn, soy to fall more on supply outlook



Corn and soy are likely to fall further in the next few weeks, as forecasts for big harvests and weak export data from the U.S. Department of Agriculture have cut baseline prices, analysts said Friday.


Until mid-February, there probably won't be any factors from the supply-demand side that can turn the weak sentiment around, said Genichiro Higaki, head of the proprietary fund management team at Sumitomo Corp. in Tokyo.


Benchmark March corn futures on the Chicago Board of Trade will likely fall to around US$3.50 a bushel, and March soy futures to around US$9.00 a bushel, he said.


At 0841 GMT, CBOT March corn futures were down 0.8% at US$3.78 a bushel, while March soy futures were 0.2% lower at US$9.8175 a bushel.


"One thing for sure, the supply and demand situation (for corn) has been loosened," said Higaki.


A combination of bearish supply and demand data this week has helped to cut CBOT corn price by 10% from last Friday.


The USDA said Thursday that corn sales from the U.S., the world's largest exporter of the grain, fell to 327,286 tonnes in the week to Jan. 7 from 364,734 tonnes a week earlier.


On Tuesday, it said the country could see record output of 13.15 billion bushels this year, up from a previous estimate of 12.92 billion and above the average of analysts' estimates at 12.82 billion.


"The much touted fund rebalancing seems to be a whimper, not a bang," Top Third Ag Marketing's Peter C. McKeegan said in a newsletter Thursday. "If the fund rebalancing is almost over, what shall be the markets next move once the funds are done buying?"


Before the USDA reports Tuesday, market participants had placed high hopes on investment demand for corn and soy, given the annual rebalancing of major commodity indexes.


Soy prices will go down a little more as well, as "the South American crop looks so far, so good," said Higaki.


If there weather turns erratic in February, it could drive prices upward, but before then, prices aren't very likely to find any support from supply-demand fundamentals, analysts said.


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