October 4, 2010

 

Lower grain prices may spur Asian buying

Asian buyers are likely to step up their physical purchases of wheat and corn over the next few days to take advantage of the latest fall in prices, trading executives and analysts said Friday (Oct 1).

 

"Many importers who were cautious in their buying, preferring to wait and watch, may step in to buy on dips," said a Singapore-based executive with a global trading company.

 

Importers in Japan who have yet to lock-in prices for the more than one million tonnes of corn they purchased on a premium-basis for October-December shipment plan to take advantage of the easing of prices.

 

Corn futures on the CBOT Thursday (Sep 30) closed below US$5.0/bushel for the first time this week. The December contract ended 1.8% lower at US$4.9575/bushel after the USDA estimated corn stocks at 1.708 billion bushels. This estimate is around 20% higher than the average expectations of analysts and the government's own projections earlier this month.

 

CBOT December wheat futures contract ended US$0.9 1/2, or 1.4% lower Thursday (Sep 30) at US$6.74/bushel.

 

The decline is in line with market expectations. Traders and analysts said Wednesday (Sep 29) that long liquidation to book profits was expected at the end of the month.

 

"We are seeing a psychological limit of prices. Corn may face resistance at US$5/bushel and wheat at US$7/bushel," said Abdolreza Abbassian, secretary of the United Nations Food and Agriculture Organization's Intergovernmental Group for Grains.

 

Corn futures could test US$4.85/bushel again early this month, said an importer in Japan.

 

The next two weeks are unlikely to be bullish, and nearby month corn futures may target US$4.50-$4.75/bushel, Scott Briggs, director, for agricultural commodities with ANZ Banking Group said in a research note.

 

Wheat may target US$6.25-$6.50/bushel and soy US$10.25-$10.50/bushel, he said.

 

"(Thursday's (Sep 29)) prices may not characterise the whole month, but speculation and sentiment that contributed to high prices seem to be evaporating," said FAO's Abbassian.

 

However, ANZ's Briggs cautioned that the latest downward correction doesn't indicate the end of the bull run in corn and wheat.

 

Soy staged a recovery from recent declines and early losses Thursday (Sep 29) after a report of stronger-than-expected weekly US exports, with China the primary buyer. The CBOT November soy futures contract ended 0.7% higher Thursday (Sep 29) at US$11.0675.

 

The latest decline in corn and wheat prices has opened a window for strategic purchases and for buying to cover gaps in import requirements, and traders expect a rebound.

 

Importers in Vietnam, South Korea, Malaysia and Taiwan are likely to buy several cargoes of corn in the next few days as the latest correction may turn out to be short lived, they said.

 

Corn prices declined as much as 5% overnight, but the market trimmed its losses to end off lows, indicating that the inherent strength is intact, another trader in Singapore said.