July 31, 2006

 

Asia Corn Outlook: Focus on freight, weather

 

Premiums of corn and wheat delivered to Asia are likely to remain steady in the week ahead, as traders eye changes in ocean freight rates and weather-related moves in Chicago futures for cues, trade participants said Monday.

 

Sluggish summer demand is offsetting tightness for vessels seen in the dry-bulk ocean freight market, traders said.

 

A panamax-sized cargo was offered at US$42.50 a metric ton Friday on the benchmark route from the U.S. Gulf to Japan, unchanged from the previous week's levels.

 

Meanwhile, trading in U.S. corn futures on the Chicago Board of Trade was muted last week as uncertainty over weather conditions provoked caution among traders.

 

CBOT September corn futures settled 1/2 cent lower at US$2.37 1/4 per bushel, and December declined 3/4 cent to US$2.53 1/2 Friday.

 

Weak summer demand in Asia is also helping offset slow farmer selling due to lackluster corn prices.

 

"U.S. farmers are still holding on tightly to their old crop because they are expecting much higher prices than at present," said a Tokyo-based grains trader.

 

U.S.farmers typically step up sales of old crops around this time of the year before harvesting new crops.

 

Monday, U.S. corn was offered at 164 U.S. cents/bu over the CBOT September contract, cost-and-freight to Japan for September shipment, unchanged from last week's levels.

 

Japanese buyers are currently mostly negotiating October-December shipments with their suppliers.

 

This week, buying in both the corn and wheat markets is expected to be slow ahead of a weather forecast out of the U.S later, traders said.

 

"Crop conditions in the eastern corn belt have been excellent. But everywhere else is hot and dry. We are generally hoping there will be enough precipitation around all the corn belts in the U.S.," said a Seoul-based trader.

 

Any unfavorable weather may stress corn crops at the current critical pollination stage.

 

In the wheat market, Japan's Ministry of Agriculture, Forestry and Fisheries is expected to announce details Tuesday of a planned milling wheat tender to be held Thursday.