January 30, 2012

 

Asian grain prices poised to rise on strong demand

 

 

Asian grain prices will likely climb this week as dry weather in South America continues, while regional demand could rise after the Lunar New Year holidays.

 

Near-month wheat, corn and soy futures on the Chicago Board of Trade are trading around US$6.50, US$6.38 and US$12.24 a bushel, respectively.

 

Most traders expect prices of the grains to rise by another 20 cents a bushel this week.

 

"Prices may rally to December levels or even higher," said Koname Gokon, the Tokyo-based deputy general manager at Okato Shoji Co.

 

Gokon said futures investors trading on spreads will likely sell wheat and buy corn, taking advantage of the former's premium and thereby narrowing the gap between the two commodities.

 

While the grains complex may register overall gains, corn may be more bullish than wheat because corn production in Argentina will likely be sharply lower than earlier expectations.

 

Based on plantings late last year, projections were that Argentina was heading for a bumper crop around 30 million tonnes, but due to prolonged dryness in key producing regions, the country's government has cut its forecast to 23 million tonnes. The United Nations' Food and Agriculture Organisation's projections are even lower, at 21.4 million tonnes.

 

Argentina's corn crop is now beyond the development stage, during which any rains would have benefited it, said Karl Setzer, an Iowa-based analyst with MaxYield Cooperative.

 

Traders said many Asian importers are turning to the US to book grain shipments for the May-July period.

 

Buyers want to lock in supplies at current levels because of increasing perceptions that the situation in South America may worsen, said a Singapore-based executive with a global commodity trading company.

 

South Korea is in the market, seeking at least 250,000 tonnes corn and 110,000 tonnes wheat for delivery in May and June. Demand for soy will likely accelerate this week after China resumes trading.

 

Japan Friday (Jan 27) bought 150,191 tonnes of milling wheat in three grades for March shipment.

 

The poor condition of winter plantings in Ukraine and speculation that Russia may tax grain exports from the next quarter are also supporting grain prices.