February 13, 2006

Asia Corn Outlook: Premiums likely up on freight

 

 

Premiums of corn and wheat delivered to Asia are likely to rise slightly, in line with higher barge freight rates in the U.S. and an expected increase in ocean freight costs in the week ahead, trade participants said Monday.

 

Barge freight rates inched up Friday on demand from buyers eager to lock in lower corn and wheat futures prices that day.

 

"An expected pickup in demand from China may push ocean freight rates higher too," said a Tokyo grains trader.

 

China is expected to become a net corn importer from 2007, following a booming domestic processing sector as well as the government's efforts to encourage the use of corn in the production of ethanol, analysts said last week.

 

A panamax-size cargo was offered at US$33.50 a metric tonne Friday on the benchmark route from the U.S. Gulf to Japan, up from US$32/tonne earlier last week.

 

Japanese buyers are currently mostly negotiating April-June shipment with their suppliers.

 

Meanwhile, U.S. corn and wheat futures broke their recent uptrend and ended lower Friday, which will put some upside pressure on premiums in Asia, traders said.

 

Corn futures on the Chicago Board of Trade ended on a weak note last week following the U.S. Department of Agriculture's projection that 2005-06 U.S. corn ending stocks would total 2.401 million bushels, above the average trade estimate of 2.384 billion and 287 million bushels larger than the previous year.

 

On Friday, CBOT March corn ended 4 1/4 cents lower at US$2.21 1/4 per bushel, May closed down 4 1/2 cents at US$2.31 3/4, and July settled 4 1/4 cents lower at US$2.40 1/2.

 

U.S. wheat futures also ended lower Friday, weighed down by weaker precious metals and crude oil, as well as a lack of fund buying after a recent bout of strength.

 

The Korea Corn Processing Industry Association may take advantage of lower Chicago corn futures to buy two panamax-size cargoes of non-genetically modified corn this week, said a Seoul-based grains trader.

 

Elsewhere, many buyers are waiting to see how the U.S. futures market will perform this week before deciding what to do next, said a trader at a large Japanese trading firm.

 

U.S. corn was offered Monday at 127 U.S. cents per bushel over the CBOT May contract, after cost-and-freight to Japan for April shipment, unchanged from last week's levels.

 

In the wheat market, Korea Flour Milling Co. is expected to announce a re-tender date following a failed tender Friday, traders said.

 

The company declined offers for 25,200 tonnes of U.S. No. 1 wheat to be shipped between April 10 and May 10 because offer prices were too high and bidders were too few, a company official said.

 

Meanwhile, Japan's Ministry of Agriculture, Forestry and Fisheries is expected to announce details Tuesday of a planned milling wheat tender to be held Thursday.