May 16, 2007

 

Asia Grain Outlook on Wednesday: Prices may remain high on freight, CBOT

 

 

Prices for imported grain to Asia are likely to remain high for the rest of the week because of high ocean freight costs and volatile Chicago Board of Trade grains futures.

 

CBOT grains futures are closely following slight changes in U.S. weather, as corn and soybean planting gathers pace and the wheat crop is in an advanced stage of development. Asian grain imports may remain sluggish over the next month or two months, analysts said.

 

Over the past several weeks, purchase tenders for grains have become scarce from the three biggest grains importers in Asia - South Korea, Taiwan and Japan.

 

None of the major importing nations are expected to cut back their overall annual import volumes for grains sharply, but it remains to be seen whether imports pick up pace in the third and fourth quarters of the year. "Japanese buyers will buy corn at a sluggish pace, maybe until September, as old crop prices in the U.S. may keep falling as planting progresses," said Nobuyuki Chino, president of grains trading company Unipac Grains Ltd.

 

High ocean freight costs have also taken grain importers totally by surprise over the last few months, as freight costs for Panamax cargoes continue to rise.

 

According to a report by shipbroking firm Simpson Spence and Young, the Panamax freight market is nearing its historical peak of late 2004, when the average cost of chartering a Panamax vessel was US$51,083/day.

 

The current average cost is US$50,000-51,000/day.

 

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

 

Analysts are almost unanimous that freight rates will continue to be high, as both China and India are likely to remain aggressive shippers of commodities globally, buoyed by their booming economies.

 

In expected deals this week, Japan's Ministry of Agriculture is expected to purchase a total 130,000 metric tonnes of U.S., Canadian and Australian corn in a tender to be concluded on Thursday.