August 28, 2006

 

Asia Corn Outlook: Premiums may gain; wheat strength

 

 

Premiums for corn and wheat delivered to Asia may rise in the week ahead as U.S. wheat futures are likely to continue receiving support from expectations of lower wheat output in Australia and Argentina.

 

Corn futures may ride on the bullish undertone in wheat futures.

 

In Asia, India continues to make news with fresh wheat import plans.

 

India's federal government said Friday that it plans to import 2 million metric tonnes of wheat at zero customs duty for delivery to the four south Indian ports of Chennai, Tuticorin, Vizag and Cochin.

 

"The imports will be allowed only through the state-owned Food Corp. of India," an official statement said.

 

The statement did not specify the date and size of the next tender, but said the total import of 2 million tonnes will likely be made by February 2007.

 

However, India's private flour millers are concerned that the federal government's ambitious wheat import program is hurting private traders' chances of importing wheat.

 

"We will be competing with the government in the global market, and international prices are bound to skyrocket because of mammoth Indian demand," a south India-based flour miller told Dow Jones Newswires.

 

Last week, 25 south India-based flour mills jointly purchased 150,000 metric tonnes of Australia-origin wheat at US$229-US$232/tonne, cost and freight basis, for delivery between October and December.

 

In other news, Japan's 2006 corn imports are not expected to fall in 2006, even though China, one of he region's biggest corn exporters, has drastically cut back its exports because of rising domestic demand.

 

Japanese corn imports may hover around last year's 16.65 million tonnes, at 16.6 million-16.7 million tonnes, said Nobuyuki Chino, president of Unipac Grains, one of the major Japanese firms involved in the grains trade.

 

Chino said premiums for corn delivered to Japan from the U.S., Japan's biggest corn supplier, may remain stable at current levels over the next 1-2 months, in the absence of any significant fundamental factors.

 

Premiums for corn delivered to Japan from the U.S. are at present at 195 U.S. cents/bushel above the Chicago Board of Trade December contract.

 

He said that ocean freight costs on the U.S.-Japan route may fall over the next several weeks to US$45-US$48/tonne from current levels of above US$50/tonne, as many grain traders are unwilling to book future shipments of grains at prevailing freight rates.

 

Among major grain import deals last week, Japan's Ministry of Agriculture, Forestry and Fisheries has bought 90,000 tonnes of wheat from the U.S., Canada and Australia in a tender concluded last week.

 

The Korea Feed Association's two branches, in Seoul and Pusan, bought a total of 85,000 tonnes of feed wheat in two separate tenders concluded last week.

 

While the Seoul branch sourced its feed wheat purchase of 55,000 tonnes from China, the Pusan branch bought 30,000 tonnes of optional-origin feed wheat.

 

In corn, South Korea's Major Feedmill Group, or MFG, last week bought 55,000 metric tonnes of U.S.-origin feed corn from trading house Louis Dreyfus Corp. in a tender.

 

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