December 20, 2011

 

Asia's grain prices may rise on South America's weather conditions

Due to weather concerns in major growing regions of South America, Asian grain prices are likely to increase this week, trade participants said Monday (Dec 19).

 

They said gains of around US$0.10-0.15 a bushel are expected in the next few days on short covering after the selling pressure of the last few months.

 

The most active March wheat and corn futures on the Chicago Board of Trade are currently trading around US$5.82/bushel and US$5.87/bushel, respectively. January soy is around US$11.38/bushel.

 

Due to costlier grain cargoes in the US, many Asian importers are turning to Brazil and Argentina to meet their needs, but a recent lack of rains in South America are causing concern, said a Singapore-based executive with a global commodities trading company.

 

Traders are now buying back their short positions and a technical rebound is on the cards, Okato Shoji Co. Deputy General Manager Koname Gokon said.

 

However, he said other fundamentals are still weak, therefore gains will be temporary and downside pressure on prices may continue even next month.

 

Many traders put resistance for CBOT wheat and corn futures at US$6/bushel and for soy at US$11.50/bushel.

 

Unless dryness in South America continues, prices may fall again early next month, said a grains importer in Seoul.

 

While the soil in some regions of Southern Brazil and Argentina is dry, it hasn't reached a point that has had an impact on yields, said Karl Setzer, an Iowa-based analyst with MaxYield Cooperative.

 

"But we need to remember that in a futures market, traders are more worried about what could happen rather than what is happening," he noted.

 

Export demand for US corn is still subdued and traders expect little support to push up the market in the next few weeks, Singapore-based commodities brokerage Phillip Futures said in a research note.

 

In corn, net speculative long positions on CBOT are at a 19-month low and their short positions are at a near record high, data from the US Commodity Futures Trading Commission showed.

 

Overall, speculators across the 14 US agricultural derivative markets have net short positions equivalent to five million tonnes as of December 13, up from 3.6 million tonnes a week earlier, ANZ Banking Group said in a report, citing the CFTC data.