May 9, 2007

 

Asia Grain Outlook on Wednesday: Rising ocean freight costs to boost prices

 

 

The prices of imported grains to Asia should remain high in the remaining part of this week as ocean freight costs continue to soar.

 

According to a report last week by shipbrokers Simon Spence and Young, the panamax market is nearing its historic peak of late 2004 when average rates for chartering vessels touched US$51,083 a day. At present, rates for panamax vessels are around US$47,000. 
 

Most of the grains delivered to Asia are through panamax-sized vessels.

 

"The record (freight) market has drawn support from high coal, iron ore and steel markets, with freight rates exaggerated by the effects of severe ongoing congestion at Australia's coal and iron ore ports," the report said.

 

Japanese corn importers are buying modest quantities of grains as they remain concerned with the high freight costs, a trader in Tokyo said.

 

In the past month, the spot ocean freight cost for the U.S. Gulf-Japan route has risen by US$20 to hover around US$80 a metric tonne.

 

Another reason why Japanese traders are not showing any inclination to step up their corn buying is the decline in Chicago Board of Trade corn futures over the past few days, as the pace of corn planting in U.S. gathers pace, he said. Traders are confident that CBOT prices will fall further as the planting progresses.

 

U.S. farmers are expected to plant a historically high corn crop this year, buoyed by high corn prices in 2006.

 

Most traders in Japan are well-stocked with corn until June and are now buying for the July-September quarter.

 

In deals this week, Japan's Ministry of Agriculture is seeking 140,000 tonnes of corn from the U.S., Australia and Canada, in a tender to be concluded Thursday.

 

Japan's government resumed its weekly wheat tender Tuesday after a two-week break.

 

A group of Philippine feed millers, poultry and livestock raisers plans to buy 51,000 tonnes of soybean meal and 28,000 tonnes of feed wheat in a tender to be concluded Wednesday.

 

The group, also known as Import Group, wants the soybean meal for July-August shipment, while the feedwheat is for delivery between June and July.