October 27, 2008

Physical trading continued at a slow pace this week in Mexico's cash grain markets as the peso weakened but some yellow corn and soy buying was reported, traders and importers said Friday (October 24).

They said despite US prices falling for most of the grain types that Mexico imports, a weakening peso offset most of the price gains for local buyers and discouraged any major new business.

"There was some business done, mostly in the yellow corn and soy market used for feed grain because the prices are relatively attractive compared to the highs we've seen earlier in the year," said one Mexican physicals trader.

But traders agreed that the "extreme volatility and speculation" currently dominating commodity and financial markets along with the continuing concern over the impact of a global economic crisis put trade on hold.

"We placed some yellow corn orders, but with the markets the way it is and all the concern over what really is going to happen, everybody are cautious about their business, nobody wants to take too much of a risk," said another Mexican trader.

The Mexican peso closed at MXN13.4275 to the dollar after hitting a low of MXN13.70 early Friday. This is still stronger than the all-time low of over MXN14.00 earlier this month but weaker than last week's close of MXN12.70.

The Mexican grain market is currently between crops and relies mostly on imported grains until new supply starts flowing by mid-November from the Bajio spring-summer crop, for which harvesting starts by the end of this month.

Corn and wheat futures ended weaker Friday at the Chicago Board of Trade. December corn fell 17 1/2 cents to US$3.72 3/4 a bushel and December wheat settled 6 3/4 cents lower at US$5.16 1/4 a bushel.

Soy futures also ended the week on a lower note. November soy settled down 20 3/4 cents at US$8.63 3/4 a bushel, and December soymeal was 70 cents weaker at US$268.30 a short tonne.