May 5, 2004

 

 

Asian Feedmillers Turn to South American Grain As Freight Rates Drop 
 

Asian traders are turning to South American grain to meet a rise in orders from feed makers following a fall in freight rates, as demand increase with the end of the bird flu outbreak.

 

Malaysia is on the look-out for Argentine corn and soymeal. Thailand is similarly eyeing Argentine corn as its domestic supplies are drying up. On the other hand, traders are expecting South Korea to cover most of its optional-origin deals with South American supplies.

 

Due to a slowdown in Chinese appetite for raw materials, shipping costs had eased about $10 to $15 a ton for Panamax-sized cargoes. This situation was encouraging some importers to step up inquiries.

 

"Softer freight should help business to pick up a bit," said one Singapore-based regional trader. "Some might try to bring in cargoes before they rise again."

 

Taiwan is also considering tendering for up to 80,000 tons of U.S. corn this week to take advantage of low freight. Shipping costs from the United States to Taiwan were close to $75 a ton a few weeks ago. Now the prices have dropped to $62.

 

Because of the rapid exhaustion of Thai and Indian supplies as well as an absence of offers from China, Asian feed millers were forced to look for South American corn cargoes. The decision to ease freight rates will help to give them some breathing space.

 

Indian soymeal supplies have also been slowing down due to poor crushing margins at home. Asian feed mills have been picking up every possible cargo that can be used as an alternative feed ingredient -- from tapioca to palm kernel.

 

Regional traders said feed demand was showing signs of picking up in Vietnam and Indonesia. The two countries were hit by bird flu earlier this year, forcing the culling of millions of chickens.

 

"Poultry prices are rising again," said Budiarto Soebijanto, chairman of the Indonesian Feedmillers Association. He added that live chickens currently cost about 8,000 rupiah a kg, compared with around 6,000 rupiah a couple of months ago.

 

He said Indonesian feed-ingredient buyers had recently finalised deals to import some Argentine corn at around $190 a ton C&F. U.S. corn was offered about $2 to $3 higher.

 

"The freight market has eased and that's good news. But I am not sure how long this scenario will last," Soebijanto added.

 

Some traders said Southeast Asian countries were negotiating for Argentine soymeal and corn, and deals could materialise soon.

 

"Argentine soymeal has been traded to Thailand recently," said one regional trader. "Malaysia is negotiating for a few Argentine corn deals."

 

With regards to the Asian soy rust that had appeared in key regions in Argentina, Asian buyers added they were not unduly worried, and that it would not affect business.

 

Argentina has confirmed the appearance of Asian soy rust in the top soy producer Santa Fe province, a sign that the wind-borne fungus had made its way into the central farming region. But officials added it would not hurt yields since it was late in the season.