March 31, 2011

Asian corn prices forecast to rise in April

Due to tight global supply of corn and expected demand from China, corn prices in Asia are likely to rise as much as 4% next month, said trading executives on Wednesday (Mar 30).

The trading executives said prices are currently subdued because of projections that planting in the US, the world's largest corn exporter, will expand greatly this year. Many traders and analysts expect US corn plantings to rise to 91.5 million to 92 million acres. The USDA will release a crop planting intentions report today (Mar 31).

"The anticipated expansion in acreage is mostly factored into current corn prices, and if the USDA projections are below expectations it could lead to a market rally," said Nobuyuki Chino, president of Tokyo-based commodities trading company Unipac Grain.

Many traders who have taken short positions in corn futures on CBOT will buy back to book profits after the USDA report is out, said Koname Gokon, deputy general manager at Japanese commodity brokerage Okato Shoji Co.
 

CBOT May corn futures are currently trading around US$6.73 a bushel.

Most traders expect prices to rally above US$7 a bushel next month if USDA projections do not meet market expectations, or if the speculation that China has purchased more than one million tonnes of US corn this month is confirmed. China is the wild card in corn trade at the moment and its future purchases (or confirmation of earlier deals) will definitely be bullish for the markets, said a Singapore-based executive with a global trading company. He said China is also exploring opportunities to import corn from Argentina.

Chinese food health officials are currently in Buenos Aires to discuss quality standards of Argentinean corn, Australia & New Zealand Banking Group (ANZ) said in a daily market note. It said the main issue being looked at is genetically-modified (GM) varieties of Argentine corn.

China has stringent rules for import of GM crops and only allows specific strains into the country. China was a fringe player in global corn trade until last year when it imported 1.6 million tonnes of the grain.

Actual corn planting will start only at the end of April, when weather concerns will also come into play, Unipac's Chino said. He said the next US corn harvest is due only in September, and until then, stocks will be tight regardless of the expansion of planted area.

The near-term corn market outlook is bullish, although there will be adjustments of positions Thursday (Mar 31), said Hiroyuki Kikukawa, general manager for research with Japan-based commodities brokerage Nihon Unicom Inc. He put the resistance level for CBOT May corn futures contract at US$7.1725 a bushel, then US$7.4425 a bushel and US$7.50 a bushel.