March 8, 2010

 

Asia Grain Outlook on Monday: Corn prices likely steady on Japan buying

 

 

Asian corn prices are likely to move sideways in a narrow range over the next few days despite an upcoming bumper crop in South America, as buyers in Japan look for more cargoes from the U.S., trade participants said Monday.

 

They said concerns also remain over how the weather will pan out as the harvest progresses in Brazil and Argentina.

 

The May corn futures contract on the Chicago Board of Trade ended down 7 1/2 cents Friday at US$3.75 1/2. Traders in Asia expect prices to hold around current levels before another round of decline.

 

"For two weeks there haven't been any purchases of South American corn by Japan," said an executive at a global trading company.

 

He said in the past few days around 200,000 metric tonnes of U.S. corn has been booked by Japanese buyers for April-June shipment, around US$230/tonne, basis cost and freight.

 

Japan is the world's largest importer of corn, buying most of its annual requirement of 16 million tonnes from the U.S.

 

However, it has also stepped up purchases this year from South America due to quality issues related to U.S. corn; imports from the region are likely to rise to 1.3 million tonnes in 2010.

 

He said freight costs from South America are usually around US$10/tonne higher versus the U.S. but since last week they have increased and are US$17-US$20 higher than U.S.-origin corn cargoes.

 

At current levels of close to US$250/tonne, C&F, there are no takers for South American corn here, said a Japan-based trader.

 

Over the past few weeks there have been good rains across corn growing regions of Argentina and this can cause fungal infection in the crop, said a Singapore-based commodities analyst.

 

There are enquiries for corn from Argentina and Brazil in South-East Asia but supply is likely to exceed demand.

 

"By and large the South American crop is good but to some extent it has already been accounted for in the recent fall in prices and more downward pressure may be seen only after market arrivals accelerate," said another trader in Singapore.

 

Private analytical firm Informa Economics has pegged the Argentina corn crop in 2010 at 21 million tonnes, up 2.8 million from the previous month's estimate. If realized, the corn projection would be 7.5 million tonnes above last year's total.