October 4, 2011


Asia's grain prices to decrease



US excess crop supply, particularly of corn, is likely to cause Asian grain prices to decrease in the next few days, according to trade participants.


This may encourage physical buyers to step up purchases, as has been the trend for the last two weeks.


Physical corn importers in East Asia have purchased more than two million tonnes since September 20. There is speculation that China has bought several hundred thousand tonnes, though the deals could not be immediately confirmed. South Korea has purchased at least 15 cargoes totaling 837,000 tonnes.


Traders and analysts expect the most-active wheat, corn and soy futures contracts on CBOT to fall US$0.10-0.20 to around US$5.80/bushel, US$5.70/bushel and US$11.50/bushel respectively.


Technical charts indicate that if corn breaches US$5.70/bushel, it may even fall toward US$5.40/bushel, a deputy general manager at Japanese commodity brokerage Okato Shoji Co, said.


Traders across asset classes are liquidating long positions, instead opting for cash savings due to an uncertain global climate, he said.


The US government Friday (Sep 30) estimated corn inventories as of September 1 were much above market expectations at 1.13 billion bushels. Analysts were expecting stocks to be below one billion bushels and closer to 960 million bushels.


These numbers dragged down the entire grains complex, with prices at their lowest level so far this year.


Analysts attribute higher inventories to weakening demand for corn.


Animal feed millers are substituting corn with wheat to cut costs, Abdolreza Abbassian, secretary of the Intergovernmental Group for Grains under Food and Agriculture Organisation, said. Demand for corn to make ethanol has also slowed down amid lower crude prices.


US demand for corn to make ethanol in the marketing year from September 1 was expected to rise to 130 million tonnes, but is likely to be closer to last year's level of 127 million tonnes, Abbassian said before the US report was released Friday.


Asian physical buying interest in the grains market may get a boost due to relatively lower prices of late, a Singapore-based executive with a global commodities trading company said.


The general perception in late September was that prices had bottomed out, but now it seems they will stay on the lower side at least until October 12, when the USDA releases its monthly supply-demand report.

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