September 4, 2010

 

Asian corn and soy prices may ease slightly

 

 

Asian grain prices are likely to ease slightly next week as investors in futures markets take profits following the rally in the past few days.

 

Meanwhile, dry weather in the US Midwest has been supporting prices of corn and soy but the upside is now limited. Investors will be keen to take profits on their long positions ahead of the monthly report to be issued by the USDA around September 10, analysts said.

 

However, most traders do not expect any major surprise from the size of US autumn harvest in the upcoming report, but still may opt for long liquidation.

 

Analysts said the US corn harvest has just begun and therefore any significant revision of yield estimates is expected only in the October and November reports.

 

The December corn futures contract on the CBOT ended ¾ cent higher Thursday (Sep 2) at US$4.47 ½ a bushel, and the market is currently hovering around a 14-month high. Traders expect prices to range between US$4.20-4.70 next week with a downward bias.

 

November soy futures, the most active contract on the CBOT, ended 3 ½ cents or 0.3% higher at US$10.09/bushel Thursday. Most traders project that prices will move between US$9.60-10.20 next week.

 

China is world's largest buyer of soy and it is well stocked with inventories. This is likely to keep a lid on prices.

 

For wheat, buyers are making purchases only to cover their immediate needs and prices are expected to remain steady around current levels.

 

The uncertainty and volatility has made buyers cautious, a Singapore-based exporter said. In the last month, CBOT nearby-month wheat futures have moved in a wide range, mostly between US$6.50-8.41/bushel.

 

Weather concerns in major growing regions point towards a bullish market but importers are still eyeing a technical correction downward.

 

Australian Prime Wheat has moved in the last month between US$290 and US$320 a tonne, free-on-board, and is currently being offered around US$310-320/tonne. Offers on a delivered basis for South East Asian destinations are around US$365/tonne, but buyers are keen at US$335/tonne.

 

The price gap of US$30/tonne between offers and bids and uncertainty over prices has slowed purchases, said one of the traders dealing with Australian wheat. Australia is the major supplier of milling wheat in Asia, followed by the US.

 

Another trader said routine sales between 40,000 tonnes and 80,000 tonnes of milling wheat are taking place every few days. Corn is being substituted for feed wheat, however, because most of the supply from Ukraine has been delayed indefinitely.

 

Ukraine is the main supplier of feed wheat to Asian countries. Shipments of close to 1.0 million tonnes of wheat into South East Asia from the Black Sea region, mostly Ukraine, over the next few months have been postponed, washed out or changed to another origin.