January 16, 2006

 

Asia Corn Outlook: Premiums may rise; demand, futures

 

 

Premiums of wheat and corn delivered to Asia may increase in the week ahead, on strong Asian demand for corn and likely gains in U.S. wheat futures.

 

U.S. wheat futures rose last week, fueled by concerns of a deterioration in dry land crop conditions in Texas. Around 80% of the wheat crop in Texas is grown in dry lands.

 

If such weather concerns persist this week, wheat futures could resume their rally when the U.S. market reopens Tuesday.

 

U.S. markets are shut Monday due to a public holiday.

 

Meanwhile, demand for corn in Asia had been particularly strong over the past week, mainly backed by feed buyers in Taiwan and South Korea.

 

After a gap of several weeks, Taiwanese and South Korean buyers returned to the market, picking up both Chinese and U.S.-origin corn.

 

"Corn prices are quite competitive right now, which is spurring demand," said a trader in Seoul.

 

Corn prices had been driven lower by aggressive Chinese corn selling, as China offered subsidies to exporters to dispose off large stocks.

 

According to a report by the U.S. Department of Agriculture, the Chinese government last year issued an export quota for sale of 4 million metric tonnes of corn.

 

The USDA believes the Chinese government may issue additional corn export quotas in the first half of 2006.

 

Among major deals in the week to Monday, South Korea's Major Feedmill Group has bought 110,000 tonnes of optional-origin feed corn from trading houses ADM and Wilmar in private negotiations.

 

South Korea's Nonghyup Feed Inc. purchased 12,000 tonnes of China-origin corn from Daewoo International in a tender concluded last week.

 

Taiwan's Great Wall Enterprises bought 60,000 tonnes of U.S.-origin corn from trading house Cargill in private negotiations last week.

 

Besides, the Taiwan Sugar Corp. is expected to buy 20,000 tonnes of U.S.-origin corn in a tender to be concluded Tuesday.

 

In wheat, Japan's Ministry of Agriculture, Forestry and Fisheries bought 146,000 tonnes of wheat for March 15-April 15 shipment last week.

 

South Korea's Daehan Flour Mills, Daesun Flour Mills and Sam Hwa Flour mills bought a total of 11,000 tonnes of U.S. No. 1 wheat from trading house Cargill last week.

 

Will Pakistan Produce Enough Wheat In 2006?

 

Pakistan's wheat production in 2006 is likely to be around 22 million compared with 21.6 million tonnes in 2005, according to several Pakistani media reports last week.

 

The wheat crop, being currently sown, will be harvested in February and March.

 

However, various analysts seem split on whether the output will be enough to meet the growing demand for wheat flour in Pakistan, especially since the government recently removed a 15% duty on export of wheat flour.

 

Pakistan millers are expected to resume wheat flour exports to neighboring Afghanistan.

 

A report in Pakistan's Dawn daily last week said the government is carrying abnormally high wheat stocks of 3.6 million tonnes.

 

The report said there could be a glut in domestic markets from April once the new wheat crop arrives.

 

However, another report in Daily Times said Pakistan's wheat consumption in the financial year ended March 31, 2006, could touch 21.5 million and rise even further in 2006-07, mainly due to a growing population.

 

Pakistan consumed 20.9 million tonnes of wheat in 2004-05.

 

The report said that if Pakistan misses the target of 22 million tonnes of wheat output in 2006, imports may continue.

 

Meanwhile, in India, state granaries are expected to release around 500,000 tonnes of wheat in the open market in January-to-March to quell sharply rising prices.

 

Prices of wheat in the open market have jumped in recent weeks on tight supplies and fears of a shortage.

 

On Friday, wholesale wheat was being offered at INR10,450-INR10,500 a tonne in New Delhi, up 36% from INR7,700-INR7,720/tonne a year earlier.