March 6, 2006

 

Asia Corn Outlook: Premiums unchanged; US market uncertainty

 

 

Premiums of grains delivered to Asia are expected to remain unchanged in the week ahead on a lack of direction from U.S. futures, trade participants said Monday.

 

U.S. corn and wheat futures were mixed throughout last week.

 

In the case of wheat, analysts aren't sure how the market will behave this week as much will depend on whether U.S. wheat growing areas will experience wet or dry weather.

 

And as far as corn futures are concerned, the single-biggest concern remains the widening spread of bird flu and its impact on feed consumption. It has already put corn prices under pressure.

 

A trader in South Korea said buyers in Asia are waiting for some indication on whether China is resuming its corn exports, before starting to import the grain in earnest.

 

China hasn't issued any fresh corn export quotas since the previous quota expired in February.

 

At present, premiums for corn delivered from the U.S. to South Korea are 130-135 U.S. cents/tonne over the Chicago Board of Trade's April contract.

 

Traders said U.S. corn prices are still perceived quite high and combined with firm ocean freight costs don't make importing U.S. corn very attractive for traders.

 

Over the last week, two major purchase deals were reported, from South Korea and Japan.

 

South Korea's Nonghyup Feed Inc. bought 55,000 metric tonnes of U.S.-origin corn from trading house Cargill in a tender last week at 130 U.S. cents/bushel premium over the Chicago Board of Trade's April contract.

 

And Japan's Ministry of Agriculture, Forestry and Fisheries bought 167,000 tonnes of wheat, as well as 21,000 tonnes of Australian-origin barley, for May 1-31 shipment.

 

The ministry doesn't reveal prices at which they import wheat or barley.

 

The biggest news this week for the wheat trade was India finally deciding to go ahead with wheat imports, after almost year-long speculation in the world market on whether the country would import. The imports come after a gap of six years.

 

Many analysts were puzzled by the Indian government's decision to put off wheat imports until a few days ago, despite spiraling domestic wheat prices.

 

The federal government Friday allowed State Trading Corporation to import duty-free wheat from Australia's AWB Ltd. at $179/tonne, cost and freight included. The first shipment is expected to arrive in India by the end of March.

 

Meanwhile, China last week announced this year's minimum purchase prices for wheat and rice, in an effort to protect farmers' incomes, according to the National Development and Reform Commission's Web site.

 

The minimum purchase price for white wheat has been set at RMB1,440/tonne, and red wheat at RMB1,380/tonne.

 

Both prices are higher than current market prices. Average quality white wheat in Shandong province was around RMB1,420/tonne last week, while red wheat in Jiansu province was around RMB1,300/tonne.

 

Chinese analysts said open market prices for wheat are expected to fall further as many local farmers are expected to liquidate their stocks to earn cash for the spring seeding season ahead.

 

Meanwhile, Pakistan's Daily Times newspaper reported that the governments of the U.S. and Pakistan signed an agreement last week, under which the U.S. will provide 46,000 tonnes of wheat to Pakistan to replenish domestic wheat used to feed survivors of the devastating Oct. 8 earthquake in parts of Pakistan.

 

The U.S. Department of Agriculture is donating $12 million to procure and transport U.S. soft white wheat to the Pakistan Ministry of Food, Agriculture and Livestock.

 

U.S. officials said the wheat will travel from Portland, Oregon to Karachi port.