September 16, 2009
Asia Grain Outlook on Wednesday: Corn, soy prices may rise; supply tight
Corn and soy prices in Asia will likely remain firm in coming sessions amid a combination of thin local supply and robust seasonal demand from millers, though regional importers are likely to be quiet following an overnight surge in U.S. futures.
Wheat prices are likely to be damped by ample global stockpiles, which will also likely reduce buying interest for now, traders said Wednesday.
In China, corn prices in key producing regions were slightly higher compared with a week ago, supported by higher feedmeal demand ahead of the approaching National Day holiday, and amid lingering drought concerns.
Most Chinese buyers are fulfilling their requirements from state stockpiles and not from the market because purchases from the government entitles them to a subsidy of RMB150/tonne, analysts said.
With new corn due to be harvested around October, old supplies are dwindling, and the fresh crop is due to reach the market around December, they said.
Traders said regional corn importers are likely to stay on the sidelines following an overnight surge in Chicago Board of trade futures, during which the December contract rose 28.75 cents - just short of the exchange-imposed daily 30-cent trading limit - to US$3.46 a bushel.
"Last night's (CBOT) rally was primarily due to short covering - I don't expect to see (Asian) buyers rushing back to the market after a spike like that," said a Taiwan-based agent for a major Japanese grains trading firm. "People are waiting to see what happens next."
"In fact, I think (local) buyers may be pretty scarce for the next few days, though if corn prices show signs of moving up to the US$3.70/bushel level, (they) could panic and jump back in," he said.
Traders said the rally on CBOT was sparked by a round of short-covering following a weather forecast, which suggested the U.S. midwest may face frost as early as next week.
Traders said support may prove limited, though the robust outlook for China's soy imports remains in place, with shipments likely to increase in the coming months following a probable decline in October.
China is expected to import 1.8 million tonnes of soys in October, the lowest since February 2007 and sharply lower than the 2.8 million tonnes projected for September, according to estimates by the China National Grain and Oils Information Center.
Ample stocks are providing a buffer for crushers, and rising foreign prices are also making imports less attractive.
But imports are expected to pick up again after October, with estimates for November rising to 3.5 million tonnes, the government think tank said.
Wheat prices, meanwhile, may continue finding pressure from ample global stockpiles and expectations of a huge U.S. harvest, traders said.
"Most of the big local wheat importers are covered through October, having bought well in recent weeks," said a Taiwan-based agent for a major Japanese grain-trading firm.
"Taiwan-based millers have around four (panamax) cargoes booked for October, so I don't expect to see much activity for another 10 days or so when they may come back to the market for another 40,000-50,000 tonnes for November shipment," he said.
Tuesday, Japan's Ministry of Agriculture, Forestry and Fisheries said it is seeking 117,000 tonnes of wheat for November delivery in a regular weekly tender to be concluded Thursday.