March 29, 2012
Trade participants said Wednesday (Mar 28) that Asian grain prices, particularly for soy which is expected to lose acreage to corn in the upcoming US spring plantings, are likely to be stable to higher for the next two days.
Investors are keenly awaiting a planting report to be released by the USDA Friday that will give an indication of growers' choices this season.
They expect near-month soy futures on the Chicago Board of Trade to rise above US$14/bushel early next month on tight supply.
A decline in US soy output last year was followed by drought in South America and now there is a strong chance of soy losing acreage to corn in the next US season, said a Singapore-based executive with a global commodity trading company.
He said prices could even test last year's highs of US$14.55/bushel, hit in February and August 2011.
"The recent rally in soy prices has prompted speculation that an acreage shift to corn may be contained but the die is already cast because most farmers in the US purchase their seeds as early as January," a broker in Tokyo said.
Soy's premium to corn is widening but many growers may have already made their planting decisions, he said. The CBOT corn contract for May delivery is now hovering around US$6.33/bushel, down from US$6.59 on March 12, while soy has risen to US$13.76 from US$13.30.
"Soy remain the leader in the commodity market, taking support from ongoing concerns over the state of the South American crops...output may be less than expected," said Karl Setzer, an Iowa-based analyst with MaxYield Cooperative.
Corn is heading for near-record production this year in the US and the fact that planting is starting to gain momentum in almost perfect conditions is weighing on prices, he said.
Market participants are going long on soy to book profits after the USDA report is released but fundamentals remain strong, traders said.
Based on past trends, soy prices could continue to outperform corn, despite having rallied strongly in the past eight weeks, ANZ Banking Group said in a research note.
In wheat, traders said global supply is ample though there are concerns of dry weather in Spain and Portugal.
Near-month CBOT wheat futures are currently around US$6.44/bushel and traders expect prices to rise above US$6.50/bushel on the back of the strength in the soy complex.