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A 20¢ corn drop this week?

10/31/2011 @ 6:41am

SINGAPORE (Dow Jones)--Asian grains prices are likely to be under downward pressure this week on long liquidation as investors shift funds to currency markets, taking leads from a stronger U.S. dollar.

Most traders expect prices of wheat, corn and soybeans on the Chicago Board of Trade to fall as much as 20 cents a bushel in the next few days.

The near-month CBOT November soybeans contract is currently trading around $12.17/bushel. December contract for wheat and corn is around $6.44/bushel and $6.55/bushel respectively.

The stronger U.S. dollar is weighing on grains prices and the trend may continue this week, said Koname Gokon, deputy general manager at Japanese commodity brokerage Okato Shoji Co.

The U.S. is the world's largest exporter of agricultural commodities and since a stronger dollar makes exports more expensive, it is usually followed by a fall in prices.

Speculative funds have also liquidated commodities positions over the past few days, including grains, to invest in currencies, a broker in Singapore said.

As the near-month soybean contract on CBOT is due to expire by mid-November, many traders are closing their positions, Gokon said.

Traders said that in the grains complex, wheat will be under more downward pressure than corn, due to ample supply in the physical market. Corn is selling at a premium over wheat on CBOT.

Those investors who sold corn and bought wheat in recent weeks are now taking profits.

In soybeans, physical demand has picked up due to fall in prices and harvest pressure in the U.S.

A South Korean food processor has purchased two cargoes totalling 110,000 metric tons of soybeans for arrival by end-January and February 20, trading executives said Monday. One cargo is of Brazilian and the other U.S. origin, they said.

Nevertheless, some analysts are bullish for the medium term.

Soybean demand is structurally robust, and firmly underpinned by macroeconomic factors, including rising per capita GDP, growing urban populations in low- and middle-income countries and the rising demand for meat, particularly in China, Standard Chartered said in a report.

"We recommend going long on March CBOT soybean futures contract at the current price of around $12.25/bushel, with the view of reaching a target of $13.50/bu," it said.

South Korean flour mills have purchased a cargo of 42,700 metric tons of Australian wheat for January shipment.

The mills purchased 39,000 tons Australian Standard White wheat at around $264/ton, free-on-board and 3,700 tons Australian Hard wheat at $296/ton, FOB.

-By Sameer Mohindru, Dow Jones Newswires, +65-9455-2449; sameer.mohindru@dowjones.com

(END) Dow Jones Newswires

October 31, 2011 07:08 ET (11:08 GMT)

DJ Asia Grain Outlook: Prices May Fall By As Much As 20 Cents/Bushel->copyright

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