September 29, 2011

 

Asian corn prices to recover

 

 

Physical demand and investors making up for corn supplies following a recent downward correction will cause Asian corn prices to recover, according to trade participants on Monday (Sep 26).

 

According to Dow Jones, the near-month corn futures contract on CBOT has fallen around 19% since hitting a record high of almost US$8 a bushel in June. Physical prices have declined by 10% since early September.

 

Corn prices on a delivered basis are now below US$330/tonne in east Asia compared with US$362.50/tonne four weeks ago. The most-active CBOT December corn futures contract is trading around US$6.48 a bushel.

 

Buyers are aggressively snapping up cargoes to take advantage of the downward correction due to concerns that prices may rally again.

 

"The same speculators who dragged down futures prices in double-quick time may go long again," a Singapore-based executive with a global commodities trading company said.

 

Supply is still tight in the US, the world's largest corn exporter though there is hope that yields may not be as bad as was forecast earlier this month.

 

Some growers put the average US corn yield estimate at 149-150 bushels an acre compared with government's estimate of 148 bushels.

 

Analysts and traders expect China to be the wild card in global corn trade. There is speculation that China may have bought several cargoes to capitalise on the latest price fall. If its imports in the marketing year from October 1 are up to five million tonnes, as is expected, it can neutralise any potential upward revision in US output numbers.

 

Most traders expect that recent physical purchases in East Asia, the world's largest corn importing region, and speculative short covering can push up CBOT prices by US$0.10-0.20 a bushel in the next few days.

 

Prices may have bottomed out for the time being and may rise above US$6.60 a bushel again, a Tokyo-based importer said.

 

He said Japanese compound feed manufacturers are aggressively locking in the final price for their earlier purchases, which were done on a premium basis to CBOT futures.

 

South Korea has emerged as one of the most active buyers. It has purchased at least 12 cargoes totaling 661,000 tonnes feed corn since September 20 at cost-and-freight prices, mostly between US$325/tonne and $340.50/tonne, but an Indian cargo was purchased around US$312/tonne, C&F.

 

Even suppliers of European corn are making a strong pitch for selling to East Asian buyers amid a large domestic crop.