August 14, 2006

 

Asia Corn Outlook: Premiums may fall; US concerns

 

 

Premiums for wheat and corn delivered to Asia are likely to fall in the week ahead, as demand for U.S. wheat and corn remains lukewarm while the U.S. corn harvest is set to be a bumper one.

 

Both wheat and corn futures slid on the Chicago Board of Trade over the past few sessions.

 

But some support for premiums may come from a firming of ocean freight rates in the past two weeks.

 

A Tokyo-based grains trader said freight rates for capesize vessels had started climbing, which has also triggered some gains in freight costs for panamax vessels that are mostly used for transporting grains to Asia.

 

The U.S. Gulf to Japan ocean freight cost for grains is currently around US$49 a metric tonne.

 

For the U.S. Gulf to Taiwan route, analyzing current tenders reveals that freight costs for August-September shipments are around US$58/tonne, while those for September-October shipments are around US$62/tonne.

 

Demand for corn is not expected to change much from the previous week, as sporadic buying from South Korean and Taiwanese feed mills is expected to continue.

 

Last week, the Korea Corn Processing Industry Association, or Kocopia, bought 110,000 tonnes of optional-origin corn from trading house Cargill.

 

Taiwan Sugar Corp. bought 23,000 tonnes of U.S. origin corn in a tender from trading house Marubeni last week.

 

Corn imports by Japan may be down this week after a "decent amount of corn" was imported over the past two weeks, said a trader at a Tokyo broking house.

 

The trader said Japanese traders have roughly bought 50%-60% of their total October-December requirements and are unlikely to return to the market before the first week of September.

 

"U.S. prices of corn are a bit too high right now for Japanese buyers anyway, so there's no rush to buy more corn," added the trader.

 

Japan generally imports around 15 million tonnes of corn every year, with very little year-to-year variations in demand.

 

At present, the premium for corn delivered from the U.S. to Japan is around 200 U.S. cents a bushel above the CBOT December contract, up 6 cents/bushel from last Wednesday.

 

In the wheat market, there was a fair amount of buying from South Korean flour mills last week.

 

Four South Korean flour mills - Daehan, Dongah, CJ Corp. and Youngnam - jointly bought 21,700 tonnes of U.S. No. 1 wheat from trading house Columbia Grains in a tender last week.

 

Korea Flour Milling Co. also bought 18,000 tonnes of U.S. No. 1 wheat in a tender last week from trading house Itochu.

 

Three South Korean flour mills - Daehan, Daesun and Samhwa - jointly bought 23,200 tonnes of U.S. No. 1 wheat from trading house Columbia Grains last week.

 

Japan's Ministry of Agriculture, Forestry and Fisheries bought 115,000 tonnes of wheat from the U.S., Australia and Canada in its weekly Thursday tender.

 

India's state-run company PEC Ltd. last week purchased 40,000 tonnes of Black Sea origin wheat from trading house WJ Grain around US$192/tonne for August-September delivery to India.

 

Meanwhile, India's State Trading Corp. (512531.BY), which has already awarded 330,000 tonnes of its recent 400,000-tonne wheat tender to trading house Agrico for supplying Russian wheat, may now approach Australia's AWB Ltd. (AWB.AU) to supply the remaining 70,000 tonnes, officials told Dow Jones Newswires.