January 3, 2007

 

Asia Grain Outlook on Wednesday: Corn, soybean premiums may gain

 

 

Premiums for corn delivered to Asia may rise during the remainder of the week, as export demand for U.S. corn remains robust.

 

Soybean premiums also may remain high in the week, as demand from exporters and the U.S. ethanol sector is likely to keep Chicago Board of Trade soy futures well supported.

 

On the other hand, premiums for wheat delivered to Asia may slip over the week, as weather conditions for the U.S. wheat crop look favorable while export demand for wheat remains sluggish.

 

Meanwhile, corn buying is likely to remain quite sluggish in Asia, as most corn buyers find current prices too high.

 

"Right now, it's wait and watch for South Korean feed buyers. I don't think any buyer is too keen to book shipments this week," said the manager of a feed buying group in Seoul.

 

Traders said most South Korean buyers have mostly fulfilled their corn needs for up to April, and when buying commences, it will mostly be for May and June shipments.

 

At present, the premium for feed corn delivered to South Korea from the U.S. Gulf is 45 U.S. cents/bushel to the CBOT May contract, while the premium for corn delivered from the Pacific Northwest is around 72 cents/bushel to the CBOT May contract.

 

Ocean freight cost from the U.S. Gulf to South Korea is unchanged from Monday of last week, at US$52-US$53/tonne.

 

In other news, India's wheat plantings in the Oct. 1-Dec. 29 period are estimated at 26.4 million hectares, up from 24.7 million hectares in the year-earlier period.

 

Plantings of wheat so far have already surpassed the normal annual level of 26 million hectares and are still in progress.

 

Meanwhile, India may ban exports of wheat to ensure ample local supplies if trading companies plan to export wheat from the upcoming harvest, Food Secretary T. Nanda Kumar told Dow Jones Newswires last week.

 

India imported around 6.5 million tonnes of wheat in 2006.

 

Analysts said that while India may also need to import wheat in 2007 because of a shortfall in domestic output, traders may still find it lucrative to export wheat, especially from wheat-growing regions near major sea ports.

 

"A ban on exports of wheat can't be ruled out - we will examine all the possibilities," Kumar said.

 

In China, soybean imports totaled 2.35 million tonnes in November, down 8.1% on year, according to the country's General Administration of Customs.

 

Turning to another major Chinese crop, corn, China's official news agency Xinhua said the country's corn processors continue to bet on corn-based ethanol output, despite the federal government halting approval for corn-based ethanol projects since early December last year.

 

China's government, worried over prospects of a grains shortage, is encouraging ethanol production from crops such as cassava and sorghum.

 

However, corn processors continue to build their production capacity, mostly for turning corn into alcohol. Such facilities can be quickly turned into ethanol production units if the government relaxes restrictions on corn-based ethanol production, Xinhua said.

 

China will become a net corn importer in the next two years, according to research by the Dalian Commodity Exchange and the National Grain and Oils Information Center, added Xinhua.