April 30, 2007

 

Asia Grain Outlook on Monday: Corn premiums may fall, soybean may gain

 

 

Premiums for corn delivered to Asia may fall in the week ahead, as forecasts of drier weather over the week is likely to help planting of corn in the U.S.

 

On the other hand, analysts said soybean prices are likely to remain well-supported on two factors: an expected sharp fall in U.S. soybean acreage this year, and continued strong demand for edible oils globally.

 

In Asia, booking of soybean shipments by Chinese traders will continue to remain weak on various factors.

 

"The main reasons for Chinese crushers' weakening interest in fresh soybean buys in the international market is the rising world ocean freight cost, sustained weakness in soymeal consumption, and hefty soymeal and soybean stocks in China," commodity analysis firm JCI Shanghai said in a report.

 

Over the past week, Chinese traders booked at most four cargoes for shipment in June and July, all from the U.S, JCI said.

 

At present, premium for delivering soybean from the U.S. to China is around 170-175 U.S. cents/bushel to the Chicago Board of Trade July contract, while Argentine soybean is being offered at a premium of 170-176 cents/bushel to CBOT July contract.

 

Brazil soybean is being offered at a premium of 180-185 cents/bushel to the CBOT July contract.

 

A key reason for Chinese importers preferring U.S. soybeans to South American soybean is that the freight cost for shipment by panamax-sized cargoes from the US to China is around US$72/tonne, while the freight cost is around US$78-US$79/tonne from South America to China.

 

As Chinese traders have been booking fewer soybean shipments over the past few weeks, arrival of soybean in Chinese ports may decline sharply in June.

 

Meanwhile, India's federal government took steps to begin its wheat import program last week, much earlier than expected by most global traders. Traders had expected India to import wheat from October onward, when the wheat from the crop being currently harvested will likely be absorbed by the market.

 

However, lower-than-expected wheat procurement by the federal government made the government consider importing wheat earlier, as it wants to ensure sufficient wheat stocks in the country.

 

The government-run Food Corp. of India, or FCI, last week invited offers from several global trading companies to bid for call options contracts to import wheat.

 

"No specific quantity to purchase wheat has been decided, but if call options are exercised, FCI can buy any volume up to 800,000 tonnes each month between August and January at designated ports," a Food Ministry official told Dow Jones Newswires.