South America to capture larger share of Asian grain market

 

 

As the US and India struggle with quality issues and higher prices that lowered competitiveness, they risk losing some of their grain market share in Asia to South America.

 

Asia's top grain buyers - Japan, South Korea and Indonesia - have started purchasing new-crop corn and soymeal cargoes from Brazil and Argentina, where bumper crops are expected this year after a year of drought.

 

Stiff competition faced by US grain in the Asian market could keep a lid on Chicago soy Sc1 and corn Cc1 prices, which posted modest gains of 4% to 6% each in February after being dragged down 12% to 14% by the end of January, staggering under the weight of large global supplies.

 

Japan, which mostly sources grains from the US, has already contracted about one million tonnes of corn from South America for 2010 shipment, its largest purchase of non-US corn in more than a decade. South Korea have renegotiated corn purchase terms after running into quality issues with US corn, which was affected by rainy and cool weather during the autumn harvest.

 

An unusually mild summer in the US was bookended by a wet spring planting season and a wet harvest. This delayed corn planting, with the crop maturing slower than usual during the cool summer months, and then staying in the fields long after it was ready for harvest.

 

Smaller grain buyers such as Malaysia and Vietnam are also taking larger corn and soymeal volumes from Argentina and Brazil as their traditional supplier India is out of the market.

 

India sells about three to four million tonnes of soymeal and about two to five million tonnes of corn each year, a small volume in global terms, but crucial for consumers seeking prompt shipments in smaller vessels. India- corn crop suffered from poor rains at the time of sowing and floods during harvest in the key producing southern region, affecting quality and forcing buyers to turn to alternative sources.

 

Indian corn is not price competitive and buyers have had problems with the rain-damaged grains, said a Singapore-based trading manager with a global grain supplier. Indian soymeal are also completely outpriced, said the manager.

 

Asia-s top five corn importers, which annually buy about 31 million to 32 million tonnes, will purchase about 25% of their corn this year from South America, traders estimated.

 

The region-s top five soymeal importers, which buy about 11 million and 12 million tonnes per year, are projected to source about 60-70% of their soymeal from South America, and the remaining 40% from India and the US.

 

South America usually accounts for 45-55% of the Asian soymeal business and less than 10% of corn supplies.

 

South American corn was this week quoted around US$225 to US$235 a tonne, including cost and freight to Southeast Asia, while US corn is being offered between US$235 and US$240 a tonne. Indian corn is priced at US$230 a tonne.

 

Soymeal from India is quoted around US$420 a tonne C&F versus South American meal priced at US$350 a tonne.