July 9, 2012

 

Asian grain buyers wait on tenders as prices rally

 

 

As the intensifying US drought cuts grain outlook, global grain and oilseed prices continued to rally, keeping Asian corn, wheat and soymeal buyers away from the market this week.

 

Buyers in the Philippines passed on a tender to buy 55,000 tonnes of wheat, while Korea Feed Association declined to buy feed wheat in similar tender, citing higher prices.

 

"Buyers are just sitting and watching the market with their eyes open in surprise," said one Singapore-based trader. "Mills in Manila rejected an offer to buy Australian feed wheat at US$312 a tonne and now they might be regretting it because prices have moved even higher this week."

 

Although Chicago corn eased on Friday (July 6) after recent steep gains, prices were set for their biggest three-week rally in 3-1/2 years, sparked by the worst US Midwest drought in nearly a quarter century.

 

The benchmark US new-crop corn has risen 38% in three weeks and actively traded November soy is up more than 15%. On a continuation basis, wheat has gained 32% in three weeks, its biggest three-week rally since April 1996, while corn has risen about 30%, its biggest rally since 2008.

 

The US Midwest will remain extremely hot and dry in the next few days, adding more stress to crops already damaged by a summer heat wave, but some relief rains are expected over the weekend, forecasters said.

 

"Everyone is looking at much lower corn yields in the US, but buyers are waiting for some sort of confirmation from the US Department of Agriculture next week before making any decision," the Singapore trader said.

 

The market will be closely watching for possible reductions to US corn and soy yield estimates in the USDA's monthly supply/demand report next Wednesday. Historically, the USDA waits until August to adjust yields.

 

In Asia's cash market, South American corn prices have climbed to around US$320-US$330 a tonne, including cost and fright (C&F), into Southeast Asia, up around US$20 from last week. Indian corn is being quoted around US$270 a tonne.

 

Most buyers, including top importer Japan, South Korea and Indonesia, are covered at least until September but Vietnam is in the market looking for soymeal and corn cargoes for September arrival.

 

"Some Vietnamese millers are really running on low stocks and they were discussing prices yesterday with traders but a deal could not be reached," said one trader who supplies soymeal to Vietnam. "They can get cheaper corn from India but for soymeal they will have to take South American cargoes."

 

South American soymeal was quoted at US$593 a tonne, C&F, on Friday, up from around US$575 being offered earlier this week.

 

Corn buyers in Asia, who account for just under half of the world's imports, have been caught on the wrong side of the market as most of them were expecting a record US crop to ease tight supplies.

 

Indian wheat prices have also climbed tracking global grain markets. Indian wheat is being offered around US$285 a tonne, free on board, compared with last week's US$260 a tonne.

 

The Middle East has bought around 200,000 tonnes of new-crop Indian wheat, as a rally in global prices and the weakening currency of the South Asian nation made exports competitive.

 

And agribusiness giant Cargill Inc sold about 32,000 tonnes of Indian wheat to Indonesia in the first large shipment of the grain to Asia in at least seven years.