July 3, 2006

 

Asia Corn Outlook: Premiums may rise on US weather

 

 

Premiums for corn and wheat delivered to Asia may rise over the week, as U.S. weather conditions for both corn and wheat crops remain unfavorable.

 

Dry weather is anticipated for both corn and wheat crops this week, which may keep Chicago Board of Trade futures for both commodities well-supported.

 

Asian demand for corn is likely to remain subdued over the week, as South Korean buyers take a break after strong purchases over the past several weeks.

 

In the wheat market, Japan's Ministry of Agriculture, Forestry and Fisheries is expected to be the biggest wheat importer for the week, with its weekly wheat auction scheduled Tuesday.

 

In the previous week, no corn import deals were reported from Taiwan or South Korea, which are among the region's biggest corn buyers, while there was quite a bit of Asian wheat buying.

 

In Japan, the Ministry of Agriculture, Forestry and Fisheries bought 80,000 metric tonnes of wheat from the U.S. and Canada in a tender last week.

 

But the biggest wheat import deal last week came from India, as the state-run State Trading Corp. bought 2.2 million tonnes of wheat in a tender, largely from Canada, Europe and Argentina.

 

STC will buy the wheat from five trading houses at prices ranging from US$190 to US$205 a tonne, on a cost-and-freight basis.

 

It will buy 720,000 tonnes of wheat from Toepfer, 550,000 tonnes from Glencore, 300,000 tonnes from ADM, 225,000 tonnes from Concordia and 405,000 tonnes from Cargill.

 

Meanwhile, in a bid to curb rising inflation, India's federal government cut the import duty on wheat imported by private traders to 5% from 50% previously.

 

The new import duty will be valid until December 2006, and will help cool down wheat prices in the country.

 

In China, a trader with a major Chinese grain buying company said the country's corn imports are unlikely to pick up anytime soon, as domestic prices and international prices are almost the same.

 

The trader said that only if international prices were to slide quite a bit would it encourage traders to import corn.

 

So far this year, only one Chinese company - Xiwang - has imported 50,000 tonnes of U.S.-origin corn for an undisclosed price.

 

In China's local markets, corn prices are steady, with little changes in either demand or the supply side.

 

Analysts said corn processors, who have been driving corn demand in China so far, have slowed down their purchases, while feed demand for corn is picking up.

 

In other news, China's official Xinhua news agency reported that the expected on-year rise in China's 2006 wheat output will arrest six straight years of decline in the country's wheat reserves.

 

It said China's wheat output in 2006 is expected to hit 105 million tonnes, an 8% rise over 2005 output. This will lead to China's wheat supply exceeding demand by 3 million tonnes.

 

However, it added that increased wheat supply has led to lower wheat prices in China.