October 29, 2008


Asia Grain Outlook on Wednesday: Corn prices may rise on fundamentals



Corn prices may see more upside in the next few days, as strong fundamentals are supportive of grain futures.


At the Chicago Board of Trade, corn futures ended higher for a second day in a row Tuesday.


"The fundamentals look pretty strong for corn and soybeans, as evidenced by the U.S. Department of Agriculture's crop report Tuesday, which is bullish for prices," said Tetsu Emori, analyst with Tokyo-based Astmax Co.


In an unprecedented move, the USDA Tuesday revised its October corn and soybean production estimates released earlier this month. It cut the corn production estimate to 12.033 billion bushels from an estimate of 12.200 billion bushels, while it cut its soybean output estimate to 2.938 billion bushels from 2.983 billion bushels.


Interestingly, while the USDA cut its production estimates for both the U.S. corn and soybean crops, only corn futures gained on the report, as soybean traders were disappointed that the cut wasn't as deep as they were expecting.


U.S. farmers are currently harvesting both of these crops.


Both CBOT soybean and wheat futures ended lower Tuesday, though they are higher in electronic trading Wednesday, with traders hunting for bargains.


Mark Samson, vice president of U.S. Wheat Associates in South Asia, said there's more downside risk to wheat futures due to the lack of any compelling bullish factors.


He said lots of wheat buyers in Asia are holding back on wheat imports, waiting for the crop harvest in the Southern Hemisphere, Argentina and Australia to begin in December.


"The current wheat prices have factored in a 14 million tonne Argentine crop and a 21 million tonne Australian crop. Anything lower will probably be supportive of prices," Samson added.


He said U.S. wheat exports have been down in the 2008-09 marketing year (June 1, 2008-May 31, 2009) so far, including to South and Southeast Asia, but added that low wheat prices and low ocean freight costs will encourage Asian buyers to stock up on inventories during the remainder of the marketing year.


At 0541 GMT, the December corn contract was trading 6 cents higher at US$3.966/bushel, while November soybeans were trading 15 cents higher at US$8.936/bushel. The December wheat contract was trading 10 cents higher at US$5.240/bushel.

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