April 17, 2006

 

Asia Corn Outlook: Premiums to hinge on US weather

 

 

Premiums for corn and wheat delivered to Asia in the week ahead may swing higher or lower, depending on weather conditions for U.S. corn and wheat crops.

 

Over the past several sessions, corn and wheat futures have had a mixed run at the Chicago Board Of Trade, and most U.S. analysts said weather holds the key to price movements.

 

"Weather looks to now begin to take on a more important role each week we (the U.S.) expand planting of corn," Tim Hannagan, analyst with U.S.-based Alaron Research said in an online report.

 

However, demand for corn is expected to remain strong in at least one Asian country - South Korea.

 

This week, South Korean buyers are likely to continue to import corn for July-September arrivals, with Korea Corn Processors Association likely to hold a tender for optional-origin corn by the end of this week.

 

"With the arrival of (newly harvested) South American corn in the market, there is expected to be some fall in international prices, which may encourage South Korean buyers," said a trader in Seoul.

 

In major corn deals last week, the Korea Corn Processing Industry Association, or Kocopia, bought a total of 110,000 metric tonnes of Chinese and U.S. or South American-origin corn from trading house Glencore in a tender concluded on Friday.

 

Of the total, 55,000 tonnes of Chinese corn will be supplied at US$142.49/tonne, and 55,000 tonnes of U.S. or South America-origin corn will be supplied at US$152.49/tonne.

 

South Korea's Nonghyup Feed Inc., or NOFI, also bought 55,000 tonnes of corn from trading house ADM last week.

 

Currently, premium on corn delivered from the U.S. to South Korea is at 117 U.S. cents/bushel above the CBOT May contract.

 

There was only one major wheat deal last week. Japan's Ministry of Agriculture, Forestry and Fisheries bought 105,000 tonnes of wheat from the U.S., Canada and Australia in a tender.

 

The ministry resumed its weekly wheat tender on April 13, after almost a month-long gap. It is expected to hold its next wheat tender on Tuesday.

 

In other news, the Indian government's decision to import 500,000 tonnes of wheat from Australia's AWB Ltd. (AWB.AU) has angered farmers in the South Asian country's wheat-growing provinces, sparking protests.

 

A major farmers' union, Bharatiya Kisan Union, has threatened to blockade South India's Chennai port in the last week of April, when the first shipment of 50,000 tonnes of imported wheat is scheduled to arrive from Australia.

 

The government also plans to import an additional 1.5 million-2 million tonnes of wheat in the next several months to shore up domestic supplies.

 

The Bharatiya Kisan Union said the government is importing wheat around INR9,500/tonne, while the state-set intervention price for buying wheat from Indian farmers is only INR6,500/tonne.

 

India's government buys a large portion of the country's total wheat output at state-set intervention prices to maintain reserves and for sale at subsidized prices to low-income families.

 

India's wheat harvest started in April.

 

Meantime, Pakistan is unlikely to import much wheat in the rest of this year, despite an expected smaller domestic wheat harvest.

 

"There is hardly any scope for wheat imports this year as carryover stocks from last year's crop is quite high," Majid Abdullah, Lahore-based vice-chairman of Pakistan Flour Mills Association, told Dow Jones Newswires.

 

Pakistan's wheat harvest, which is currently ongoing, is expected to total 20.5 million tonnes, compared with 21.6 million tonnes in 2005.