May 8, 2006

 

Asia Corn Outlook: Wheat may rise; corn uncertain

 

  

Premiums of wheat delivered to Asia may rise in the week ahead as forecasters project a reduced U.S. wheat crop, while corn may swing either way as underlying demand remains strong but weather conditions also remain very favorable for U.S. corn crop planting.

 

Over the past week, both CBOT corn and wheat futures had a mixed run. But wheat futures are likely to be well supported this week on reports that the entire U.S. winter wheat crop this year may be at 1.3 billion bushels, compared to 1.5 billion bushels last year.

 

On the other hand, corn premiums will depend on how CBOT corn futures play out this week amid contradictory pricing pressures. While U.S. corn stocks are expected to be lower because of higher offtake by ethanol plants, weather for U.S. corn planting is excellent.

 

In Asia, South Korea's Korea Feed Associate may hold a tender later this week to buy around 165,000 metric tonnes of corn for October shipment, a trader in Seoul said.

 

Other South Korean buyers are likely to wait and watch rather than import corn this week.

 

"The current price of international corn at US$136 a tonne is too high for us. We are waiting to see how the prices behave in the coming day before floating fresh tenders," said an official of a feed-buying group.

 

In Japan, a trader said importers still have lots of corn to buy for food and feed use for the July-September period, but they are unlikely to do so before the end of this month.

 

"Right now, market is in a bit of lull. Traders have, over the past few weeks, already bought 750,000 tonnes of corn. So they may pick up imports again in the last week of May," said a trader in Tokyo.

 

At present, premium on corn supplied from the U.S. to Japan is at 125 U.S. cents/bushel above the CBOT July contract, for July shipment.

 

Japanese food corn buyers are expected to buy 1 million tonnes of corn for the July-September shipment, mostly through acreage contracts with U.S. farmers.

 

Such contracts ensure the traders a certain amount of corn every year, though the price depends on the CBOT corn futures.

 

In the meantime, Japan's Ministry of Agriculture didn't hold a wheat purchase tender last week, as Japan was closed from Wednesday to Friday.

 

The ministry is expected to hold a wheat purchase tender on Tuesday.

 

There were no corn or wheat purchase deals reported in Asia last week.

 

In other news, Philippines' traders and feedmillers plan to step up imports of corn in 2006 to meet a supply deficit of 1.3 million tonnes of corn, said the Manila Standard Today newspaper.

 

"The industry has to cope with the growing demand both for food corn and corn as animal feed," said Ricardo Pinca, vice president of the Philippine Association of Feed Millers Inc., during a corn conference.

 

Total corn imports for the year so far are around 279,642 tonnes, of which 102,792 tonnes have already arrived.

 

Also, a leading ethanol analyst told Dow Jones that China may switch over form more expensive corn to other materials to produce ethanol.

 

"My understanding is that the Chinese official policy is (to) turn away from corn-based ethanol because they are concerned about the risk to food security. Other crops will be promoted instead, such as cassava and sweet sorghum," said Simon Bentley, head of starch and sweetener research at LMC International, a U.K.-based commodities research firm.

 

Bentley added that the Chinese government is likely to remove the subsidies on corn-based ethanol in the near future, as China becomes a corn importer.