July 16, 2012

 

Asia grain buyers to source for non-US grain due to drought

 

 

The severe US Midwest drought is likely to push Asian buyers towards grains from non-US origins, trade participants said Friday (July 13).

 

There is already hectic buying activity in some parts of East Asia as buyers scramble to hedge against a further rise in prices.

 

Near-month soy futures on the Chicago Board of Trade rose to an all-time high of US$16.7950 a bushel during intraday trade this week and corn prices rose above US$7.8 a bushel, close to a record high of 7.9975 hit last year.

 

CBOT wheat futures hit their highest level in 17 months Thursday (July 12) at US$8.42.

 

"There is uncertainty in the market because the drought in the US can worsen or rains can bring relief and ease prices," a Melbourne-based trading executive said.

 

While some buyers are covering at least some of their needs at current price levels, others are in a mood to defer, pointing out that market is already off highs in the past few days.

 

"We can't rely on the US alone as the [price] offers are too high," said a grains importer in Tokyo.

 

Japanese animal feed manufacturers are increasingly turning to South America and Ukraine for corn due to the sharp rise in US prices.

 

Japan is still seeking 500,000 tonnes of feed-grade corn for September shipment and will likely source at least 20% of it from South America, traders in Singapore and Tokyo said.

 

Shipments from Ukraine will increase by November, when its next corn harvest will be available, an executive at a Singapore-based global trader said.

 

Brazilian corn for October-December shipment is around US$25-US$27 a tonne cheaper than US corn. Ukrainian corn for November-January shipment is US$30-US$32/tonne cheaper than corn from the US.

 

On Thursday, Taiwan's Maize Industry Procurement Association bought 60,000 tonnes of Brazilian corn at a 60.6 cents/bushel premium over the CBOT December corn futures, basis cost and freight, which at current prices is about US$317/tonne, C&F.

 

Japanese importers are also reducing corn imports that are based on premiums over CBOT futures, instead buying more at flat prices.

 

South Korean importers plan to buy around 275,000 tonnes of feed grade wheat for November arrival but actual purchases may be higher if corn prices keep rising, traders said.

 

They said wheat from the Black Sea region or Indian corn may be a viable option.

 

South Korea is also seeking to buy 220,000 tonnes of feed corn for December and 420,000 tonnes for January arrival, but a significant part may be sourced from Ukraine, which is expecting a bumper crop.

 

Around a third of South Korea's January-May corn imports came from Europe, more than half of which were from Ukraine, the US Grains Council said Friday.

 

US drought has pushed up global wheat prices by around US$50/tonne in the last four weeks, making Pakistan's wheat competitive. Pakistan recently sold wheat to Malaysia and Indonesia.