January 6, 2012
Holding back orders in the face of a rally in global corn and soy markets lifting prices to multi-month highs, Asia's animal feed producers are likely to slow purchases in the coming weeks.
Vietnam is likely to replace more corn with Australian feed wheat, while Malaysia and Indonesia, which mainly rely on South American corn, are likely to postpone plans until the end of January.
This week, Chicago corn climbed to a near two-month high, rising more than 16% from a December low of US$5.70 a bushel, while soy jumped nearly 13% from a December low to their highest since October 28 – triggered by a drought in agriculture powerhouse Argentina which is threatening to reduce yields.
Wheat gained some 18% from a December low to its highest in more than three months.
Offers for the new-crop Argentine corn have jumped to US$305 a tonne, including cost and freight to Southeast Asia, from US$290 a tonne being quoted in December.
"Buyers can easily hold back purchases for March and April shipment until the end of January," said one Singapore-based executive with an international trading company.
"If the crop really deteriorates by the end of January, they will have no choice but to pay a higher price. But if we have rains in Argentina next week, this entire weather premium which has been built into the market will be taken out."
Malaysia and Indonesia are covered for corn imports until March.
Vietnam, which buys mainly spot cargoes, is expected to buy 100,000 tonnes of feed wheat for April shipment, up from 50,000 to 60,000 estimated by traders earlier.
"For Vietnam, we had become optimistic about corn when South American prices traded around US$290 a tonne," said another Singapore trader who sells feed grains into Asia. "But now we feel they will continue to take more feed wheat."
Dry weather in Argentina, the world's second largest corn exporter and the biggest soyoil and soy meal supplier, is continuing to underpin prices.
Brokerage R.J. O'Brien on Wednesday cut its harvest potential for corn in Argentina by 5-7 million tonnes and soy by three million tonnes.
Cropcast trimmed its Argentine soy crop forecast to 49.82 million tonnes, down 3% versus USDA's current outlook for 52 million tonnes.
The USDA's current forecast for Argentina's corn crop is 29 million tonnes. It will release updated production data in its next crop report due on January 12.
Argentina has suffered from weeks of heat and below-normal rains due in part to the La Nina weather pattern.
Although temperatures are likely to remain high, some forecasters are calling for rain beginning Tuesday which will be crucial for the corn crop as it goes through the pollination stage.
South Korea, the world's third largest corn importer, has been cornering cheaper cargoes from Ukraine and taking large volumes Australian feed wheat.
"South Korea is one country which could have been a game changer with lower corn prices," the Singapore feed grains trader said.
Australia feed wheat was quoted around US$265-270 a tonne, C&F, compared with South American corn being offered around $305-310 a tonne.
In the soy meal market, traders said some buyers were turning to India for spot shipment following spike in South American offers.
"Vietnam and Thailand have been booking Indian meal, but it is small cargoes of 2,000-5,000 tonnes in containers," a soy meal trader said.
Indian soy meal was traded into Southeast Asia at around US$370 a tonne, C&F, compared with around US$410 being offered from South American cargoes.
Last week, Taiwan's Breakfast Soy Procurement Association (BSPA) rejected all offers and made no purchase in a tender for up to 60,000 tonnes of soy from the US or Brazil.
