May 3 2010

Asian corn prices may fall this week as traders book profits in futures contracts after prices got a temporary boost on expectations of possible defaults on export contracts from India and purchases last week by China.

China has purchased close to 500,000 metric tonnes of US corn, mostly for May shipments, traders said. The nation is expected to import at least one million tonnes to cool local prices. A surge in domestic prices in India has raised concerns that some traders may default on or renegotiate contracts that were finalised at lower rates.

The July corn futures contract on the Chicago Board of Trade settled 5 cents, or 1.4%, higher at US$3.69 a bushel Thursday (Apr 29).

"Prices may have gone up on China importing substantial volumes after several years but investors will soon realise that there are ample stocks available to meet this demand," said Jay O'Neil, a senior agricultural economist at the International Grains Programme of Kansas State University.

The progress in corn planting in the US so far has been excellent due to favourable weather conditions and the country is heading for a record output of around 333 million tonnes this year, he said. Around half of the crop has already been planted and the figure may rise to 75%-80% by early this week.

Many buyers in Japan and South Korea have been on the sidelines on expectations that prices may decline, said a Singapore-based executive at a global trading company. The latest increase in prices has been due to the sudden imports by China and these buyers are expected to resume purchases next week, mainly of September shipments, he said.

"Unless China's purchases are exceptionally large, the current level of prices cannot be sustained," an importer in Tokyo said.

July corn futures may fall below US$3.60/bushel soon on technical selling and profit-taking, he said.

China had 53.17 million tonnes of corn at the end of the 2008-09 marketing year, up sharply from 39.39 million tonnes a year earlier, according to data published by the USDA

Supplies are expected to fall to 48.77 million tonnes by the end of the current marketing year to September, a level that would still be considered comfortable.