March 8, 2013
As importers cover gaps in requirements for prompt shipments and US supply tightens, Asian grain prices will likely move higher this month.
The world-wide grains market is in transition, they said. Supply from drought-hit US 2012 harvests has tightened and South American crops are still in the ground in many areas and will not reach East Asian ports before end-April or early May.
The most active wheat, corn and soy futures contracts for May delivery on the Chicago Board of Trade will reach US$7.30, US$7.20 and US$15/bushel this month respectively, many traders and analysts expect. The contracts are currently trading around US$7.05, US$7.09 and US$14.64 a bushel respectively.
"The cash market remains firm as we see buyers continue to push for deliveries--particularly in corn," MaxYield Cooperative analyst Karl Setzer said.
There is also strength in the near-month soy contract because traders expect the USDA to lower its forecast for inventories at the end of the marketing year on August 31, Setzer said.
Even end-August corn inventories forecast may be revised lower, Tokyo-based commodity brokerage Okato Shoji Co. deputy general manager Kaname Gokon said. Last month the USDA forecast US end-August inventories will fall 36% on-year to 16.06 million tonnes and soy inventories 26% to 3.4 million tonnes. Stocks would have been lower but for projected US imports of more than 2.5 million tonnes of corn and 500,000 tonnes of soy in the 2012-13 marketing year, analysts said.
"Until recently global markets shrugged off high US corn prices due to a record harvest [last year] in Brazil but as old crop supply dwindles and shipments are stuck in acute congestion at Brazilian ports buyers are looking for alternatives," a Singapore-based executive with a global commodity trading company said.
Indian wheat and Ukraine corn has replaced US corn in animal-feed production since last year, Setzer said. However, India sold wheat above US$320/tonne, free-on-board in recent months and is now getting offers around US$300-302/tonne which it rejected last week.
Near-month corn futures contracts for March and May delivery on CBOT are now trading at a premium to wheat. In mid-January wheat was at US$0.55/bushel premium to corn.
There is an upside potential for wheat, corn and soy for the next few weeks, traders said. But as South American harvest peaks and US planting starts prices will again be under downward pressure. The US is expected to plant a record acreage of corn this year which will again push prices to a discount to wheat after a few weeks, Gokon said.