November 19, 2011

 

Drop in Asian grain prices could trigger demand

 

 

The grains prices in Asia could lower by up to US$0.25/bushel next week and the drop will trigger physical buying of wheat, corn and soy, trade participants said Friday (Nov 18).

 

Near-month wheat, corn and soybean futures contracts on the CBOT are currently trading around US$5.99, US$6.16 and US$11.90 a bushel. Most traders expect the contracts to find support at US$5.70, US$6 and US$11.65 a bushel.

 

After overnight losses, prices have recovered marginally and may hold gains later Friday, but the market will likely go through another correction next week, said a Singapore-based executive with a global commodities trading company.

 

Prices haven't bottomed out yet and there is still a potential for downside, Okato Shoji Co. deputy General Manager Koname Gokon said by phone from Tokyo.

 

Traders point towards a plethora of origins for grain-importing countries to choose from due to bumper crops in most regions.

 

The US is still world's largest exporter of agricultural commodities, but countries such as Australia, Russia, Ukraine, Argentina, Brazil and India are offering cheaper prices.

 

Traditionally this is the season for the US to make sales but Argentina continues to issue export certificates for corn, Karl Setzer, an Iowa-based analyst with MaxYield Cooperative said by e-mail.

 

Weekly US export sales of grains are unsupportive for prices, ANZ Banking Group said. It said net US export sales of both wheat and corn are lackluster and below expectations.

 

In soy, even though the US made significant sales to China last week, total export commitments are about two-thirds compared with a year earlier. Buyers are turning to cheaper origins. Taiwanese importers purchased Brazilian soy from Cargill this week.

 

If prices continue to fall, they will push up demand in the physical market, Hiroyuki Kikukawa, said the general manager for research with Japan-based commodities brokerage Nihon Unicom.

 

Buyers in East Asia are already locking in supply for January-March arrival. The Taiwan Flour Millers' Association Friday purchased US Hard Red Winter wheat at US$372.96/tonne, C&F, down 8.3% from last month's purchase.

 

Vietnam is buying Indian corn and soymeal and Australian feed wheat. South Korean buyers have purchased at least 235,000 tonnes of corn and 165,000 tonnes feed wheat for end-February and early-March arrival.