January 25, 2010

 

Asia Grain Outlook on Monday: Soy, corn may fall more; watching weather

 

 

Soy and corn are prone to further downside due to supply expectations, despite bullish U.S. export sales data, but weather conditions in South America in February are critical to crops there and could swing the market the other way.

 

"They (soy and corn prices) could fall further. The USDA (crop output) reports issued in early January were too bearish," said Genichiro Higaki, head of the proprietary fund management team at Sumitomo Corp. in Tokyo.

 

March soy futures traded on the Chicago Board of Trade have fallen 9% so far this year, and were trading steady at US$9.52 a bushel as of 0747 GMT. March corn futures have lost 12% from the start of the year, and were up 0.5% at US$3.66/bushel.

 

Higaki pegged support for the benchmark soy and corn futures at US$9/bushel and US$3.50/bushel, respectively.

 

Export sales data released Friday by the U.S. Department of Agriculture showed weekly soy export sales at a net 990,600 tonnenes for the week ended Jan. 14, with 929,600 tonnenes sold for delivery in 2009-10 marketing year, better than the high end of trade expectations.

 

Weekly corn sales topped 1.6 million tonnenes, a marketing-year high, the USDA said.

 

Despite the bullish data, analysts said the overall bearish supply-demand picture, coupled with fund selling triggered by the slides in crude oil and equities on Friday, weighed on the grains.

 

"The theme (of soy) this year will be record-high global production," Barclays Capital said in a research note last week.

 

The previously positive view on corn on the back of improving demand this year had also been tempered by a significant upward revision in the U.S. crop, it said.

 

However, as weather conditions in February are critical to the growth of the crops in South America, prices will be very sensitive to weather developments there, and this could offer upside potential, Higaki said.