August 9, 2012

 

Asian grain buyers to increase purchases due to supply gaps

 

 

Due to gaps in supply and recent downward correction in prices which may be short-lived because of strong fundamentals, Asian grain buyers are expected to step up purchases in the next few days.

 

"Cash prices haven't declined as much as the futures. Nevertheless, it makes sense to cover part of the needs at current levels," said a Singapore-based executive with a global commodity trading company.

 

Many buyers have no option but to make purchases because they are yet to cover their needs for October shipment, said an importer in Jakarta.

 

Near-month soy and corn for August and September delivery on the Chicago Board of Trade hit a record high of US$17.7775 a bushel and US$8.2875 on July 20. September wheat hit a four-year high of US$9.4725 on July 23. The contracts are now trading around US$16.05, US$7.90 and US$8.77 a bushel respectively.

 

Rains in many parts of the US, though delayed, can still stem the fall in yields of soy, which is a positive factor weighing on prices after the recent bull-run, analysts said.

 

They pointed out that investors are also taking profits ahead of the release of a monthly demand and supply report by the USDA on Friday (Aug 10). Some of the revival in demand is already evident.

 

South Korea's largest feed miller, Nonghyup Feed Inc., Tuesday (Aug 7) made a rare purchase of 55,000 tonnes of Indian feed wheat from Nidera at US$323.32/tonne, basis cost and freight, for arrival by November 10. This is the first time in 12 weeks that a South Korean feed miller has purchased feed wheat.

 

South Korea's Feed Leaders' Committee also bought 55,000 tonnes of Indian feed wheat at US$323.32/ton from Starcom Resources.

 

The Busan and Seoul branches of the Korea Feed Association are seeking two cargoes totalling 110,000 tonnes of optional origin feed wheat in a separate tender that closes later Wednesday (Aug 8).

 

The deals indicate a change in pattern of trade, where Asian grain importers are increasingly turning to non-traditional origins to cut costs. Similarly, Japan is buying corn from Brazil and Ukraine instead of the US.

 

"Global grain prices are rising due to extreme weather, and buyers are trying very hard to keep costs low," said an importer in Seoul.

 

"We will buy from the cheapest source and also ensure quality standards," an official of the Korea Feed Association said.

 

Taiwan Sugar Corp. Wednesday (Aug 8) bought a cargo of US soy from commodities trader Itochu Corp. It bought corn at US$389.50/tonne, C&F, and a US$1.9530-a-bushel premium over the December futures contract on the Chicago Board of Trade.

 

It bought soy at US$651.20/tonne and a US$2.2660 premium over the November contract on CBOT, both C&F.