March 20, 2006

 

Asia Corn Outlook: Imports to slow; traders covered

 

 

Asian demand for wheat and corn is expected to slow in the week ahead, as most traders in South Korea and Japan appear to have covered their needs until June.

 

South Korean buyers were very active in importing corn last week.

 

"I think most traders have mostly covered their corn needs up to June. Since U.S. corn is the only variety available right now, they don't have much choice on origins," said a trader in Seoul.

 

China, the other major corn exporter for Asia, hasn't renewed its export quotas, which expired Feb. 28.

 

Traders said South Korean buyers usually cover their corn requirements three months in advance.

 

The premium for corn delivered to South Korea from the U.S. is currently at 135 U.S. cents a metric tonne over the Chicago Board of Trade's May contract.

 

Traders expect the premium to fall to the 133-134 cents/tonne level over the next few weeks, as U.S. Gulf to South Korea ocean freight costs are showing signs of falling a bit.

 

Among the major South Korean import deals for corn last week, South Korea's Nonghyup Feed Inc., or NOFI, bought 155,000 metric tonnes of optional-origin corn. Trading house Bunge will supply 55,000 tonnes at US$136.24 a tonne, cost and freight, while trading house Cargill will supply 100,000 tonnes at 118 U.S. cents a bushel above CBOT's May contract.

 

The Korea Corn Processing Industry Association, or Kocopia, bought 212,000 tonnes of optional-origin corn in two tenders concluded last week.

 

Meanwhile, the Korea Feed Association will conclude a tender Tuesday to buy 180,000 tonnes of U.S.-origin feed corn.

 

In Japan, traders said corn buying slowed last week after heavy buying over the preceding three weeks.

 

"Traders are taking a breather, as almost 90% of Japan's corn import needs for the April-June quarter seem to have been fulfilled," said a Tokyo-based broker.

 

The broker added that the premium for corn delivered to Japan from the U.S. is currently at 127 cents/tonne over CBOT's May contract.

 

He said the outlook for premiums hinges entirely on ocean freight costs.

 

"It's really tough to predict which way ocean freight costs will swing. We'll have to wait and see," said the trader.

 

Meanwhile, the Japanese government is unlikely to import any more wheat in the current financial year, ending March 31.

 

March 15, Japan's Ministry of Agriculture, Forestry and Fisheries bought 17,440 tonnes of feed wheat as part of the simultaneous-buy-sell or SBS quota that Japan agreed to under a World Trade Organization agreement to allow foreign producers limited access to the Japanese market.

 

March 16, the ministry bought 133,000 tonnes of wheat from the U.S. and Canada.

 

In other news, the outlook for India's wheat crop continues to remain unclear, with analysts saying hot weather and scant rains over the past several weeks may hit output, while the federal government insists wheat output will not be damaged at all.

 

India's wheat crop is currently being harvested.

 

"From modern wheat production areas of northwest India to northeastern regions marked by indigenous agricultural practices, below-normal precipitation and high temperatures are wreaking havoc," said a recent U.S. Department of Agriculture report.

 

Last week, however, India's Finance Minister P Chidambaram said rains in wheat-growing areas in March will help the crop and there will be no loss of production.

 

India's federal government estimates 2006 wheat output at 73.1 million tonnes, up from 72 million tonnes in 2005.