February 13, 2009

For the first time in three days, corn, soy and wheat futures rebound on Thursday (February 12) as importers including Japan, South Korea and Egypt rushed for supplies before freight costs jump further.

 

South Korea issued tenders to buy 165,000 tonnes of corn and 55,000 tonnes of soymeal for feed production while Japan bought 132,000 tonnes of milling wheat, including 86,000 tonnes from the US. Egypt plans to buy at least 55,000 tonnes of wheat.

 

The increase was also supported by port congestion delay in Australia which may hold up grain shipments from the country.

 

Tomokazu Amano, research team chief at Mitsubishi Corp. Futures & Securities Ltd. in Tokyo said overseas buyers are concerned about surging import costs following sharp increases in freight rates. He said importers "are likely to rush for purchases while corn and soybean prices stay at current cheaper levels."

 

Corn for March delivery was up 0.5 percent at US$3.705 a bushel in electronic trading on the Chicago Board of Trade as of 2:24 p.m. Singapore time. The most-active futures are down 54 percent from a record US$7.9925 on June 27.

 

Soy for March delivery gained as much as 0.5 percent to US$9.8325 a bushel before trading at US$9.79. Futures have dropped 40 percent from a record US$16.3675 on July 3.

 

The Baltic Dry Index, a measure of shipping costs for commodities, rose for a 17th straight day as demand to ship coal and iron ore boosted capesize vessel rates to a four-month high.

 

On the other hand, the index rose 4.1 percent to 2,055 points yesterday, according to the Baltic Exchange. The gauge has more than doubled this year after collapsing a record 92 percent last year as demand for raw materials fell and the world economy slumped.

 

Wheat for March delivery added 0.4 percent to US$5.4525 a bushel at 2:22 p.m. Singapore time after falling 2.3 percent yesterday. Prices have tumbled 60 percent from a record in February 2008.

 

Exporting its biggest crop in three years, wheat exports from Australia may be delayed because of port congestion after the nation opened the market to multiple traders.

 

At least 19 vessels are waiting to load grain from ports in Western Australia, the biggest exporting state, according to Bloomberg calculations. CBH Group, the state's biggest grain handler, told customers it can't take orders for February or March and temporarily halted April bookings, Colin Tutt, general manager of operations, said in an e-mail.

 

Park Yang Jin, business department senior manager at Daehan Flour Mills Co., Korea's largest milling wheat importer said the prolonged delay may help Chicago wheat prices as buyers may have to turn to the US.

 

The area of China's wheat crops affected by the worst drought in five decades has shrunk in size by 25 percent since the peak of the disaster, Wei Chaoan, vice minister of agriculture said. The area of affected "crops in eight main growing regions declined," Wei said. At the moment, 40 percent of wheat crops still face drought, he added.