August 3, 2004

 

 

Asia Corn Outlook: Prices To Be Flat To Higher On Freight
 

Prices of corn and wheat delivered to Asia are expected to be flat to higher in the week ahead due to rising freight rates, trade participants said Tuesday.

 

Ocean freight rates have staged a sizable rebound from the lows in mid-July, with Panamax-size cargoes in particular seeing a sharp increase in rates, traders said.

 

On the benchmark U.S. Gulf to Japan route, the Panamax-size cargo is offered at $54-$55 a ton, up almost $18 in the past three weeks, said a Tokyo-based grains trader.

 

But a combination of a seasonal slowdown in demand, an improved supply outlook and a weakening Chicago futures market should keep prices subdued for now, they added.

 

"Plus, it's the height of the summer vacation season now with many buyers and traders taking turns to go on leave. I don't think there'll be active buying in a week or two," said a Seoul-based grains trader at an international trading house.

 

Meanwhile, the corn supply in the region is on the rise with news that China has earmarked 7 million metric tons of corn for exports in the second half of this year, according to a recent report by semi-official China National Grain and Oils Information Center.

 

China exported a mere 1.63 million tons of corn in the first six months, China Customs figures showed. But traders said these days corn prices offered from other origins could be more competitive despite China's close proximity to other Asian markets.

 

"It depends on at what price (Chinese traders) are going to sell it. Prices from other origins, after all cost and freight, could be even cheaper (than Chinese corn) these days," said a Singapore-based grains trader with an international trading house.

 

Due to continuing ideal weather as crop progress in the U.S., major corn and wheat contracts traded on the Chicago Board of Trade have all seen big losses in the past week in a market with no other fresh news.

 

CBOT September Wheat finished 4 3/4 cents higher at $3.17 per bushel Monday, which was achieved after dropping 16 1/2 cents last week and setting a contract low of $3.09 in Monday's opening moves.

 

However, traders said they are waiting to see the new crop production report scheduled to be issued Aug. 12 by the U.S. Department of Agriculture.

 

The report will answer the biggest question in the corn pit - How big is this year's U.S. crop?

 

"Market consensus puts the crop between 10.8 billion and 11 billion bushels, higher than the July USDA report of 10.6 billion," said a Tokyo-based trader.

 

Asian buyers have covered most of their needs for months to come, so they can afford to retreat to the sidelines for the time being, traders said.

 

"If the CBOT turns downward again, some buyers may seize the opportunity to buy. Otherwise, they will just wait and see with no hurry," said a Seoul-based trader.

 

In Japan, corn buyers are looking at October, November and December shipments now. The U.S.-origin corn is offered at $159 per ton for October shipment, up from last week's $157/ton.

 

Tuesday, Taiwan's Great Wall Group bought an October shipment cargo of up to 60,000 tons of U.S. No. 2 corn at both $150.76/ton and 157.95 U.S. cents per bushel over CBOT December contract.

 

Milling wheat buyers are active in the market this week, and they have all bought U.S. No. 1 wheat.

 

South Korea's Korea Flour Milling Co. bought 18,500 tons of U.S. wheat at prices ranging from $146.70-$166.91, while Daehan Flour Mills Co. bought 20,100 tons of U.S. wheat at prices ranging from $146.80-$163.88/ton.

 

Also Tuesday, the Taiwan Flour Millers Association bought 43,000 tons of U.S. No. 1 wheat at prices from $151.36-$164.94/ton.