May 22, 2006

 

Asia Corn Outlook: Premiums may fall led by CBOT

 

 

Premiums of wheat and corn delivered to Asia are expected to fall in the week ahead, as CBOT corn and wheat futures may see some decline.

 

While corn futures are likely to slip on continued news of good weather for the U.S. corn crop, wheat futures could come under profit-taking pressure.

 

Meanwhile, demand for corn is likely to be healthy in Asia, with South Korea and Taiwan likely to buy U.S.-origin corn this week.

 

In wheat, Japan is likely to buy between 100,000-150,000 metric tonnes this week, as it has done over the last few weeks.

 

However, the big demand push for wheat imports may come from India, where the State Trading Corporation, or STC, may award its 3 million tonne wheat import tender to multiple bidders.

 

India concluded a tender to import 3 million tonnes of wheat on May 18, however stringent financial and quality conditions led to no bidders actually bidding for the entire tendered quantity.

 

In fact, the total quantity bid by all the eight bidders comes to less than 3 million tonnes.

 

The eight bidders include AWB Ltd (AWB.AU), Glencore International AG (GNC.YY), Agrico Trade, Columbia Grain, Geneva-based Two Three Trading SA, Cargill Inc. (CRG.XX), Toepfer International and Concordia.

 

In fact, Indian government officials may issue an additional tender to import wheat soon, if its needs are not substantially met by the current tender.

 

In the meantime, politicians from opposition parties as well as government allies have criticized the government wheat tender, pointing out that India doesn't need to import wheat at a time when harvesting of wheat is still going on.

 

In other tender news, Seoul-based Korea Corn Processing Industry Association, or Kocopia, passed on a buy-tender for two cargoes of optional-origin corn totaling 110,000 metric tonnes last week.

 

According to a trader, the company apparently declined an offer from Bunge Ltd. for one cargo of U.S. or South American corn at US$153.33/tonne or US$143.33/tonne of Chinese origin, on a cost-and-freight basis, as it is looking to purchase two cargoes at the same price.

 

The trader added that Kocopia will hold a fresh tender to seek 110,000 tonnes of corn this week.

 

In Taiwan, the Members Feed Industry Group will conclude a tender on Tuesday to buy 60,000 tonnes of U.S.-origin corn for June-July shipment. Last week, South Korea's Nonghyup Feed Inc., or NOFI, bought 110,000 metric tonnes of optional-origin corn from trading house Toepfer in a tender.

 

In wheat, Japan's Ministry of Agriculture, Forestry and Fisheries bought a total of 145,000 tonnes of wheat from the U.S., Australia and Canada for July 1-30 shipment last week. In other news, a U.S.-based analyst said China's grain inventories are near 30-year lows and the country may increase wheat import and cut corn exports to rebuild stocks.

 

The analyst said Chinese buying in both these commodities may support international prices in coming months.