May 14, 2012

 

Asia's soy-corn price gap to widen

 

 

Executives and analysts said Friday (May 11) that while Asian soy may gain this week, Asian corn prices are likely to come under downward pressure, widening the price gap between the two commodities.

 

The USDA Thursday (May 10) estimated corn inventories above expectations while lowering stock projections for soy.

 

"The overall outlook for grains next week is bearish, particularly for corn," said Hiroyuki Kikukawa, general manager for research at Nihon Unicom in Japan.

 

The most active July soy futures on the Chicago Board of Trade, which was near a four-year high above US$15/bushel at the end of April, has eased significantly--to US$14.385 a bushel--due to long liquidation and profit-taking, as investors took leads from ongoing plantings in the US

 

Traders said they expected prices to move toward US$15/bushel again in the next few weeks. CBOT corn for July is trading at US$5.83 a bushel. With the spread between corn and soy above US$8.50 a bushel, most traders and analysts expect it to widen further--by up to another US$0.15.

 

The US is gearing up for a record corn harvest in September of 376 million tonnes, and with near-perfect weather for the time being, some traders are tipping prices to fall toward US$5.50/bushel next week.

 

Although US soy production is also set to recover, drought in South America will exert additional demand pressure, which is supporting prices.

 

Wheat prices are also under downward pressure because US spring plantings are progressing well and the winter wheat harvest is ahead of schedule. Asian buyers have been snapping up corn and wheat cargoes at lower prices.

 

The Busan branch of the Korea Feed Association Thursday purchased a 55,000-tonne cargo of optional-origin corn from Noble Resources at US$271.40/tonne, cost and freight, for arrival by November 30.

 

This is the lowest price any South Korean buyer has paid so far in 2012 for corn bought in a tender and--in a significant development--slightly lower even than a recent feed wheat purchase: MFG paid US$272.30/tonne for feed wheat Tuesday (May 8).

 

Corn had been trading at a large premium to wheat in the cash market for more than a year.