April 10, 2006

 

Asia Corn Outlook: Demand for corn likely dull

  

 

Asian demand for corn is likely to remain low for the week ahead, while demand for wheat is expected to come from Japan.

 

South Korea and Japan, which have been actively buying corn over the past few weeks, have now slowed down their imports, as most importers have already covered their April-June requirements.

 

In South Korea and Taiwan, no new import deals for corn were reported this week.

 

"South Korean traders are waiting and watching to see if corn prices soften a bit before buying shipments for July-September delivery," said a trader in Seoul.

 

A trader in Tokyo said Japanese importers have mostly fulfilled their buying requirements and are unlikely to return to the market before the last week of April.

 

"Buying may only pick up around April 20, as traders start buying for July-September shipment," the trader said.

 

Currently the premium for corn delivered from the U.S. to Japan is around 121 U.S. cents/bushel above the CBOT July premium.

 

In wheat, Japan's Ministry of Agriculture, Forestry and Fisheries is expected to resume its weekly wheat tender from Tuesday, after discontinuing imports since March 16.

 

The ministry generally buys wheat from the U.S., Canada and Australia through its weekly wheat tenders.

 

At the CBOT, corn futures rose over the last two days, on the back of strong U.S. demand for ethanol, which is encouraging funds to remain bullish on corn.

 

Wheat futures in the U.S. remain mixed, with weather concerns for the U.S. wheat crop likely to drive futures over the next several days.

 

In other news, wheat output in South Asia is expected to be lower than initial estimates, as both major wheat producers - India and Pakistan - are likely to harvest smaller wheat crops.

 

Pakistan's federal agriculture minister Sikanadar Hayat Bosan said last week that the wheat crop, which is currently being harvested, is likely to be around 20.5 million tonnes, lower than initial estimates of 22 million tonnes, largely because of unfavorable climatic conditions in the key wheat growing Punjab province.

 

Pakistan cultivated 21.6 million tonnes wheat in 2005.

 

Also, the U.S. Department of Agriculture has revised India's wheat output estimate lower to 72 million tonnes, from its initial estimate of 73 million tonnes.

 

"Unusual weather fluctuations in major wheat growing areas since mid- February, such as abnormally high temperatures, followed by untimely rains and hail in the second week of March, and a subsequent drop in temperatures have tempered the 2006 wheat harvest prospects," the USDA report said.

 

India produced 72 million tonnes of wheat in 2005.

 

However, India's federal government continues to forecast the wheat output for 2006 at 73 million tonnes.

 

In a related development, India and Pakistan are mulling a barter trade arrangement in commodities, with one possibility being India selling sugar to Pakistan in exchange for importing wheat from Pakistan.

 

While the government hasn't disclosed any details on the possible bartering arrangement, traders said that based on current market prices, India can barter a tonne of sugar for around 2.5 tonnes of wheat from Pakistan.

 

In other production-related news, the Manila Times daily said the corn harvest in Philippines was 1.51 million metric tonnes during the January-March period, compared with 1.25 million tonnes during the same period in 2005.