February 27, 2006

 

Asia Corn Outlook: Premiums to ease as trade slows

 

 

Premiums of corn and wheat delivered to Asia are likely to inch lower in the week ahead, because of slow trade and stronger U.S. corn futures, trade participants said Monday.

 

The recent rebound in ocean freight rates was checked by thin demand for shipping ahead of a settlement in annual iron ore negotiations, traders said.

 

This week, buying in both the corn and wheat markets is expected to slow because of holidays in Taiwan Tuesday and South Korea Wednesday, traders said.

 

A panamax-sized cargo was offered at $36 a metric tonne Friday on the benchmark route from the U.S. Gulf to Japan, unchanged from the previous week's levels.

 

Also weighing on premiums are firm U.S. corn futures on the Chicago Board of Trade, which rallied near six-month highs Friday on speculative buying amid supportive export demand and momentum from outside markets.

 

Friday, the U.S. Department of Agriculture said 2005-06 corn weekly export sales totaled 1,490,500 tonnes, above market expectations of 900,000-1.2 million tonnes.

 

The rise in corn prices triggered farmer selling, and an increase in supply in the cash market will also pressure premiums, said a Tokyo-based grains trader.

 

CBOT March corn finished 4 3/4 cents higher at $2.27 3/4, and May ended 5 cents lower at $2.38 3/4 per bushel. For the week, March corn was up 1 1/4 cent and May corn gained 1 1/2 cent.

 

Monday, U.S. corn was offered at 132 U.S. cents/bu over the CBOT May contract, cost-and-freight to Japan for April shipment, down from 133 U.S. cents/bu last week.

 

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

 

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

 

Traders said Asian grain importers will continue monitoring the movement of U.S. futures and were likely to buy only on dips as they have purchased most of what they need for the coming months.

 

Taiwan Sugar Corp. bought two cargoes of U.S. No. 2 yellow corn Wednesday, traders said.

 

For the first cargo, TSC paid $146.59/tonne for 10,000 tonnes and 137.40 U.S. cents/bu over the CBOT May contract for the remaining 13,000 tonnes.

 

TSC paid 128.25 U.S. cents/bu over the CBOT May contract for the other cargo of 10,000 tonnes.