June 12, 2006

 

Asia Corn Outlook: Premiums may fall on CBOT trend

 

 

Premiums for wheat and corn delivered to Asia may fall in the week ahead, as weather conditions remain favorable for U.S. corn and wheat crops.

 

Both wheat and corn futures on the Chicago Board of Trade were weaker most of last week, and the trend may continue as the next seven to 10 days look quite good for both these crops in the U.S.

 

In Asia, quite a bit of wheat demand may come in this week.

 

While Japan is scheduled to hold its weekly food wheat tender on Tuesday, it is also likely to buy 20,000 tonnes of feed wheat in a simultaneous-buy-and-sell, or SBS, tender to be concluded on Friday. The tender is part of the SBS quota for Japan, under a World Trade Organization agreement, to allow foreign producers limited access to the Japanese market.

 

In India, there is possibility of the state-run State Trading Corporation floating tenders to import up to 2.2 million tonnes of wheat this week.

 

India plans to import a total of 3.5 million tonnes of wheat in 2006 to shore up its reserves, of which tenders for 1.3 million tonnes have already been awarded.

 

The federal government has made it clear that it has no plans to continue importing wheat once it reaches its target of 3.5 million tonnes.

 

Meantime, U.S. exporters are expected to have a better shot at competing to sell wheat to India in the forthcoming tender, U.S. government officials told Dow Jones Newswires.

 

An "Indian wheat tender will likely be issued in the next few days," a U.S. Department of Agriculture official said, adding "I would expect that it will be acceptable to our exporters and that they will aggressively compete for the Indian business."

 

U.S. exporters were frustrated with India's previous wheat tenders, said Rebecca Coleman, director for the export group U.S. Wheat Associates, in a recent statement. She said tender terms were "problematic" for U.S.-origin wheat.

 

In other news, Taiwan's wheat imports are likely to fall to 1.05 million tonnes in the 2006-07 (October-September) marketing year from an estimated 1.1 million tonnes in 2005-06 due to higher stocks, said a U.S. Department of Agriculture report.

 

The report added that Taiwan's corn imports in 2006-07 marketing year (October-September) will be around 4.9 million tonnes from an estimated 4.85 million tonnes in 2005-06.

 

Taiwan imports most of its wheat and corn needs from the U.S.

 

Meanwhile, Indonesia's wheat imports may rise 5% on year to around 3.7 million tonnes in 2006, largely because of wheat's price advantage over rice and the growing offtake of wheat flour by biscuits and noodles manufacturers, a senior industry executive told Dow Jones Newswires.

 

"The price of rice has risen this year in Indonesia while wheat flour prices have remained steady, which may explain the higher demand for wheat," said Fransiscus Welirang, head of Bogasari Flour Mills.

 

Bogasari Flour Mills is one of the world's largest flour mills and private buyers of wheat.

 

In major import deals last week, South Korea's Nonghyup Feed Inc., or NOFI, bought 165,000 tonnes of corn in a tender. Of this, around 110,000 tonnes will be supplied by Louis Dreyfus and the rest by Noble Grains.

 

At present, the premium for U.S. corn delivered to South Korea from the U.S. is around 120 U.S. cents/bushel above the CBOT September contract.

 

In wheat, Japan's Ministry of Agriculture, Forestry and Fisheries bought 106,000 metric tonnes of wheat for Aug. 1-31 shipment in a tender last week.

 

Taiwan Flour Mills Association, or TFMA, bought 70,470 metric tonnes of U.S. No.1 wheat from trading house Toepfer in a tender last week.