June 19, 2006

 

Asia Corn Outlook: Wheat premium may fall on harvest

 

 

Premiums of wheat may fall in the week ahead as the U.S. hard red winter wheat harvest gains pace, though corn premiums may swing either way, depending on weather conditions for U.S. corn.

 

Over the last week, prices in both Chicago Board of Trade corn and wheat futures remained mixed.

 

In wheat, some support for CBOT wheat futures may come in during the week, if a significant amount of U.S. wheat presence is seen in India's state-run State Trading Corporation's 2.2-million-tonne wheat import tender, for which bids will be opened on Tuesday.

 

The final award of the tender may take place over the next 7-10 days, as government officials will scrutinize the bids to ensure compliance with quality and financial terms, besides negotiations on price with various bidders.

 

India's two previous wheat import tenders this year, total of 1.3 million tonnes, witnessed no participation from U.S. traders, as most felt that the quality and financial terms of the tender were tough to meet.

 

However, India's federal cabinet last week diluted wheat quality conditions for the current tender to ensure wider participation.

 

India's agriculture minister Sharad Pawar has said the government will stop importing wheat once it reaches its import target of 3.5 million tonnes. As of Monday, orders for import of 1.3 million tonnes have already been placed.

 

In corn, South Korean feed buyers remained very active, buying mostly U.S.-origin feed corn last week.

 

However, a trader in Seoul said South Korean buyers may have purchased enough corn for now, and the next 14 days may not see much buying.

 

"Most traders are quite well stocked for the July-September quarter," a trader said.

 

At present, corn delivered to South Korea from the U.S. is at a premium of 123 U.S. cents/bushel above the CBOT September contract.

 

In major import deals last week, South Korea's Korea Feed Association bought 220,000 tonnes of U.S.-origin corn, of which 110,000 tonnes will be supplied by trading house Cargill and the rest by Bunge.

 

Korea Feed Association's Pusan branch also bought 55,000 tonnes of corn last week in private negotiations with Mitsubishi.

 

South Korea's Nonghyup Feed Inc, or NOFI, bought 55,000 tonnes of optional-origin corn from trading house Louis Dreyfus in a tender last week.

 

The Korea Corn Processing Industry Association, or Kocopia, bought 165,000 tonnes of optional-origin corn from trading houses Cargill and Bunge in a tender.

 

In Taiwan, Members Feed Industry Group was the only major corn buyer last week, buying 60,000 tonnes of corn from Cargill in tender.

 

In wheat too, South Korean flour mills were quite active last week.

 

While flour mill Daehan grouped with Daesun and Samhwa to buy 24,000 tonnes of U.S. No.1 wheat from Cargill, Daehan also teamed up with Dongah, CJ Corp and Youngnam to buy 14,300 tonnes of wheat from Cargill in a separate tender.

 

In Japan, the Ministry of Agriculture, Forestry and Fisheries bought 90,000 tonnes of wheat from the U.S., Canada and Australia last week.

 

The ministry's weekly wheat auction for this week is scheduled to be held on Tuesday.

 

The ministry also bought 18,145 tonnes of food wheat from undisclosed origins last week, as part of its simultaneous buy-sell tender.