September 17, 2011

 

Asia's corn buyers to take advantage of lower prices

 

 

Asian corn buyers are likely to increase purchases amid a recent downward correction in prices, according to a Dow Jones report.

 

Investors are liquidating long positions in December Chicago Board of Trade futures and taking positions in contracts due next year, said Koname Gokon, deputy general manager at Japanese commodity brokerage Okato Shoji Co.

 

Most-active December CBOT corn fell 23.25 cents or 3.2% Thursday (Sep 15) to a one-month low of US$7.01 a bushel due to favourable weather conditions in the US.

 

Around 0544 GMT Friday, the contract was 3.0 cents higher at US$7.04/bushel.

 

Japanese compound feed manufacturers are keen for prices to fall to US$7.00/bushel or lower before pricing cargoes they purchased earlier, said Nobuyuki Chino, president of Tokyo-based commodities trading company Continental Co.

 

Japan is the world's largest importer of corn, purchasing around 3.2 million tonnes of feed-grade corn every quarter, mostly on a premium basis over Chicago Board of Trade prices.

 

East Asian importers will likely buy several hundred thousand tonnes if December corn prices fall below US$7.00/bushel, said a Singapore-based executive with a global commodities trading company.

 

Most analysts expect corn prices to fall further, finding support around US$6.80/bushel.

 

Lower yields in the US are factored in at these prices, and supply-side pressure from harvesting is weighing on the market, Gokon said.

 

Although corn supply will likely tighten more over the next few months, there is more volume available now than previously expected, another trader in Tokyo said.

 

The USDA has revised its forecast for inventories to fall to 23 million tonnes by August 31, from a previous estimate of around 17.0 million-18.0 million tonnes.

 

This may have neutralised the bullish impact of Chinese corn purchases, which traders estimate at more than 3.0 million tonnes for delivery over the next several months.

 

A bumper corn crop in East Europe is also keeping a check on prices, Continental's Chino said.