October 30, 2012


Asian grain prices may be under pressure on sluggish demand


Asian grain prices may be under pressure in the next few days due to long liquidation as a result of sluggish demand, while the ongoing plantings season will boost South American acreage.


Soy and corn futures on the Chicago Board of Trade hit record highs in September and August respectively due to successive droughts in South America and the US, the world's largest suppliers.


Investors are now tracking the next crop in South America where planting is under way.


The outlook for grain prices this week is bearish due to good progress in plantings in South America, Hiroyuki Kikukawa, general manager for research at Nihon Unicom in Japan, said.


"Early indications are that the farmers in Argentina and Brazil will plant" a record soy crop, London-based International Grains Council (IGC) said Friday (Oct.26).


Favourable weather conditions may propel a 7% expansion in Brazil's soy acreage in 2012-13, which--along with improved yields--could push output up by 21% to 80.5 million tonnes, IGC said.


Soy is competing for acreage with corn. Brazil's corn acreage is forecast to rise 5% to 16 million hectares, IGC said.


Most investors and analysts put support for near-month wheat, corn and soy futures on CBOT at US$8.45, US$7.25 and US$15.30. December wheat and corn futures are trading around US$8.45/bushel and US$7.35/bushel, while November soy is at US$15.46/bushel.


Lower demand for US corn for use as animal feed is also weighing on prices, Singapore-based Phillip Futures said in a research note. Asian corn importers are turning to Brazil and Ukraine to meet part of their needs.


Even though plantings for the next season have already begun, there is still plenty of corn in Brazil from the previous crop to be shipped out, a Singapore-based executive with a global commodity trader said. Brazil's corn output rose 27% in 2012 to a record 72.6 million tonnes, according to IGC.


Australia is exporting wheat at a frenetic pace and has made large sales to Southeast Asia from the new crop for November-January shipment. Harvest of this year's crop is on-going and expected to be lower than last year, but prices are still under pressure due to high carryover stocks.


"Despite the expected lower output, there is no slowdown in exports because of carryover inventories from the previous year," an exporter in Melbourne said.


Australia's wheat inventories as of October 1 were estimated at eight million tonnes, IGC said. The stocks are equivalent to more than 30% of what it exported in the previous marketing year ended September 30.


Ukraine's ban on wheat exports was on expected lines and has been mostly factored by the market, traders said, adding that supply gaps will be met mainly by France and the US.


India has mainly been exporting wheat from state stocks through tenders, but has shipped less than 500,000 tonnes of government-held wheat since the tenders began in July due to cumbersome procedures, Tejender Narang, a New Delhi-based trading executive, said.

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