September 10, 2012

 

 

Extending a trend seen over the past few days, Asian buyers will likely pick up the pace of grain buying over the next few days, betting that the USDA will reduce its corn output estimate next week.

 

Buyers are actively locking in deals, taking advantage of a recent decline in prices--near-month corn futures on the Chicago Board of Trade have fallen almost 6% since hitting a record of US$8.43 a bushel four weeks ago.

 

But prices may rebound if the USDA lowers its corn output estimate a monthly supply-and-demand report due next Wednesday. In its August report, it lowered its output estimate by 17%, to 273.79 million tonnes, citing the effects of a serious drought in the country's Midwest.

 

"Fundamentals are tight and prices are unlikely to fall significantly unless the USDA springs in a surprise in the next week's report, and this is prompting buyers to cover at least a part of their requirements," said a Singapore-based executive with a global commodity trading company.

 

South Korean feed millers have resumed corn imports after a gap of almost three months, taking advantage of the lower prices. They have bought more than 300,000 tonnes of feed grains, including at least 244,000 tonnes of corn, in just two days.

 

Japanese buyers are locking in premiums around current price levels and also making fresh purchases, said an importer in Tokyo.

 

In Vietnam, importers are buying Indian corn as a substitute for Australian feed wheat, which costs at least US$30 more per tonne, said Hoang Duong Hai, director of animal feed company Lac Hong.

 

South Korea's largest feed miller, Nonghyup Feed Inc., or Nofi, Thursday (Sep 6) bought 124,000 tonnes of Brazilian corn, which is available at a discount to Indian feed wheat on a delivered basis.

 

The lowest offer for optional-origin--including Indian--wheat was around US$332/tonne, C&F, while Brazilian corn was available around US$326/tonne, said one of the executives familiar with the deals.

 

This marks a reversal of the recent relationship between the grains, with corn on a delivered basis having mostly traded at a premium to feed wheat since mid-June because of the US drought.

 

Major Feedmill Group (MFG) and the Busan Branch of the Korea Feed Association bought optional-origin corn, expected to be supplied from South America, around US$326.90 and US$330.59/tonne, C&F.

 

"We are getting South American corn at an unusually low price, and it may be partly due to the Argentinean government's plans to allow additional...exports," said an importer in Seoul.

 

MFG bought feed wheat at US$332.75/tonne, C&F, likely to be supplied from India, traders said.