August 23, 2011

 

Asian grain prices to remain choppy

 

 

The presence of conflicting leads is likely to cause Asian grain prices to fluctuate in both directions for the next few days, according to trade participants on Monday (Aug 22).

 

According to Wall Street Journal, the most active December wheat and corn futures contracts on CBOT were trading US$0.08 and US$0.0525 higher at US$7.6925/bushel and US$7.3050/bushel, respectively at 0815 GMT. The CBOT November soy contract was trading US$0.07 higher at US$13.7550/bushel.

 

Due to a weak US dollar and falling stock markets, investors are putting their money in commodities such as grains, said the president of Tokyo-based commodities trading company Continental Co.

 

He said the weaker US dollar is eroding the profits of grain exporters there, prompting them to raise prices.

 

The US is the world's largest exporter of agricultural commodities, selling millions of tonnes to Asia. It controls more than half the global trade in corn.

 

While the weak US dollar is supporting prices, an ample supply of wheat from the Black Sea region, combined with limited demand, is weighing on prices, said a Singapore-based executive at a global commodities trading company.

 

Even lower corn production in the US is already factored into the market, and current price levels may not hold once the harvest begins, said the president.

 

Earlier this month, the USDA lowered its domestic corn output in the marketing year that begins September 1 to 328 million tonnes from 342 million tonnes, and cut its estimate for soy in the marketing year that begins October 1 to 257 million tonnes from 261 million tonnes.

 

Analysts point out that since corn crop pollination is complete in most areas in the US, further lowering of yield projections seems unlikely.

 

Most corn buyers in Japan, the largest corn importer, who purchased at a premium to futures on the CBOT, are not pricing their cargoes at current levels, expecting a downturn in prices.

 

Wheat buyers are considering the viability of importing from Ukraine, particularly for feed.

 

In the next few months, Ukraine and Australia will be competing to sell cheaper grades of wheat below US$300/ton, basis cost and freight, for Southeast Asia destinations, a trader in Singapore said.

 

Taiwan will tender for a cargo of higher grades of US wheat on September 1.

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