November 12, 2011

 

Asian grain prices seen to rise; upside limited

 

 

In the week ahead, Asian grainprices may gain modest support fromtight US supply and technical buying after the recent downward correction, butlower US corn demandestimate may limit the upside, traders said Friday (Nov 10).

 

They said prices of wheat, corn and soy may rise by up to 25 cents a bushel by early next week.

 

The near-month wheat contract on the Chicago Board of Trade is currently trading around US$6.23 a bushel while corn is at US$6.48 a bushel. November soy is around US$11.97 a bushel.

 

"Overall fundamentals are weak due to the ongoing harvest pressure in many countries but mild gains are likely in the near term," said a Singapore-based executive with a global commodities trading company.

 

Another trader in Tokyo said corn prices in particular are likely to get support from the USDA report earlier this week, which revised down the country's corn output forecast for the current marketing year that started September 1, by over 3.0 million tonnes due to lower yields.

 

"The USDA report is bullish for corn as the US is the main global supplier and prices may test US$6.75 a bushel," analysts said.

 

Traders, however, point out that the upside potential is limited because the USDA also revised lower this year's US domestic corn consumption forecast for animal feed by 2.5 million tonnes.

 

In the physical market, a buyer in South Korea purchased US corn this week around US$332/tonne basis cost and freight for arrival by February and offers to China were around US$338/tonne, C&F, for prompt shipment.

 

Traders expect US corn prices to rise by US$3-$5/tonne but some importers are still seeking cheaper sources.

 

A South Korean buyer bought a cargo of Indian corn this week around US$296/tonne, C&F. Traditional US corn buyers Japan and Taiwan are purchasing the grain from Ukraine, said Cary Sifferath, US Grains Council's senior regional director for the Mediterranean and Africa.

 

He said buyers may also substitute corn with cheaper feed wheat.

 

On a delivered basis, Australian feed wheat can be around US$65/tonne cheaper than US corn. This week, optional origin feed wheat was offered around US$268/tonne, C&F in a South Korean tender.

 

However, in high-protein milling wheat, prices are expected to get support due to lower production in the US, traders said.