July 21, 2008

 

Asia Grain Outlook on Monday: Corn buying thin on weak demand from Japan

 

 

Corn buying in Asia may remain thin this week as traders in Japan, a major importing country, postpone purchases on expectations of a further fall in prices.

 

Japan is one of the large Asian corn importers left to finalize its purchases. Dow Jones had earlier reported that South Korea, another major buyer, largely finished its imports for the year.

 

"Chicago Board of Trade corn futures had taken a sharp hit over the past several sessions, but (Japanese) traders aren't buying, as they think the market has yet to hit the bottom," said Nobuyuki Chino, a grains buyer with Unipac Grains Ltd. in Tokyo.

 

"There's no fundamental justification for such high prices, and hence it's likely that prices will fall more," Chino said, echoing views of the Japanese traders.

 

CBOT December corn futures Friday closed below the 100-day moving average for the first time since October 2007, as periodic rains and lack of excessive heat improved crop outlook in the U.S.

 

The December corn contract has declined 27% since the record high of US$7.99-1/4 per bushel reached on June 27. Friday, the contract closed at US$6.28-1/2 per bushel.

 

In Japan, the landed cost of U.S. corn has declined to around US$403/metric tonne from US$440/tonne a month back, though it still isn't enough to convince buyers to commit purchases.

 

China Buys Cheaper Soybean; India's Rain Woes

 

Chinese soybean importers are boosting purchases, taking advantage of falling soybean prices on the CBOT.

 

Last week, Chinese importers booked 15-17 cargoes of soybeans, up sharply from 7-9 cargoes a week earlier, commodity consultancy firm Shanghai JCI said Friday.

 

The increased purchases were largely a result of lower CBOT soybean prices, said Tu Xuan, an analyst with JCI.

 

The soybeans, bought mostly from the U.S. and Brazil, will be delivered from August to November.

 

CBOT soybean futures fell sharply on Friday on favorable weather forecasts for the U.S. crop, and with the Argentine government announcing that it would revoke a soybean export tax. The move, highly unpopular with farmers, had led to a sharp drop in Argentine soybean exports over the past few months.

 

Still, the fall in soybean prices may be limited as the crop's outlook from India deteriorates on scant rains.

 

India's federal government released data over the weekend which said monsoon rains in the July 9-16 week were 19% below normal, while the forecast until Wednesday is for subdued rains in the soybean-growing western and central states.

 

Traders said that the soybean crop, planting for which is fast nearing an end, desperately needs rains to ensure steady output for this year. The crop is almost entirely rain-fed.