July 12, 2012

 

Asian traders focus on USDA's monthly report

 

 

The USDA's monthly supply and demand report on Wednesday (July 11) is being watched by Asian traders, with the corn crop in focus as dry Midwest weather has sent CBOT December corn prices up 44% since June 15.

 

This in turn has sent spot prices up, putting off Asian buyers who have mostly stayed on the side lines since last month. Corn prices on a delivered basis for fourth-quarter arrival in East Asia have risen by more US$90 a tonne since mid-May.

 

Amid rising prices, Japan's animal feed manufacturers are increasingly turning to South America and Ukraine for corn imports due to a sharp rise in US prices, trading executives said Wednesday (July 11).

 

Japan, the world's top importer, is still seeking 500,000 tonnes of feed-grade corn for September shipment and is likely to source at least 20% of it from South America, the executives said.

 

Shipments from Ukraine will increase by November, when its next corn harvest will be available, an executive at a global trading company said on the side lines of the World Sustainable Agriculture Congress.

 

Brazilian corn for October-December shipment is around US$25-27 a tonne cheaper than US corn, which is trading around US$365/tonne, basis cost and freight, traders said.

 

Ukrainian corn for November-January shipment is US$30-32/tonne cheaper than corn from the US, where prices have surged due to a severe drought.

 

Meanwhile, Japanese compound feed manufacturers are also reducing imports of corn, priced at a premium basis over CBOT futures, instead buying more volumes at a flat price, trading executives said.

 

Traditionally, Japanese importers price more than 70% of their feed corn needs at a premium to CBOT futures, where the final price is fixed later, but these volumes have now fallen to less than 50%.

 

Corn prices are rising and many importers don't want to take the risk of buying on a premium basis, an executive said on the side lines of the Sustainable Agriculture Congress in Singapore.

 

According to a poll by Dow Jones Newswires, analysts expect the USDA to cut its yield forecasts for the US corn crop by 7.2%, following unusually dry weather in much of the Midwest.