October 15, 2012

 

Asian grain prices may rise on tight corn, soy inventories

 

 

Asian grain prices may rise next week on USDA's forecast of tight corn, soy supplies in the year ahead.

 

"The tone, particularly for corn, has changed to bullish and supply will remain tight until the arrival of the South American harvest in the next quarter," said Kaname Gokon, deputy general manager at Tokyo-based brokerage Okato Shoji.

 

Near-month wheat futures on the Chicago Board of Trade rose 1.9% Thursday (Oct. 11) to US$8.86 a bushel. Corn jumped 5.0% to US$7.73 a bushel, and soy rose 1.7% to US$15.48 a bushel.

 

Many market participants, expecting US corn and soy harvest to exceed expectations, had taken short positions and were forced to cover those positions, pushing prices higher, Gokon said.

 

In its monthly report Thursday, the USDA raised its estimate of soy output by 8.6% but lowered its corn forecast.

 

The USDA lowered its forecast for the country's corn stocks as of end-August 2013 by nearly 16%, to 15.73 million tonnes. Also, US soy inventories are expected to remain precariously low. The USDA raised consumption and export estimates.

 

The corn estimates surprised the market because the USDA raised its estimate of planted acreage, but this was offset by a likely decline in yield by 0.8 bushel an acre, said Karl Setzer, an Iowa-based analyst with MaxYield Cooperative.

 

Market participants now put immediate resistance for near-month CBOT wheat at US$9 a bushel, corn at US$7.90 and soy at US$15.60. Corn offers more potential upside than soy, Gokon said.

 

Most soy buyers have covered their needs several months in advance, while China, the main importer, bought volumes exceeding its requirements as a precautionary measure due to the severe drought in the US Midwest, said a Singapore-based executive with a global commodity trading company.

 

The greater soy output estimated by the USDA will provide additional supplies to the global trade, he said. Meanwhile, a decline in the supply of corn from the Ukraine will lead to higher prices, traders said.

 

"There are hardly any purchases from Ukraine this year because of tight supply and concerns that shipments will be delayed as ports freeze in winter," said Nobuyuki Chino, Tokyo-based president of Continental Rice Corp.

 

Global grain and soy inventories are tight but farmers in South America are expected to respond to high prices by expanding acreage, which would be a positive development, Abdolreza Abbassian, secretary of the FAO's Intergovernmental Group on Grains, told Dow Jones Newswires earlier this week.