October 7, 2010

 

Buyers secure more than 500,000 tonnes Asian corn

A recent decline in global corn prices has given Asian buying a boost, with corn purchases amounting to more than half a million tonnes and locking in prices for earlier purchases of almost the same volume.

 

Larger-than-expected corn inventories in the US prompted a 12% decline in prices last week, although the market has regained some of its losses, and the fall has led to a flurry of activity with importers in Japan, South Korea, Vietnam, Indonesia and Malaysia aggressively seeking large volumes or pricing in cargoes they've already bought.

 

Nearby CBOT corn futures, which peaked at a two-year high around US$5.28 a bushel late last month, are now hovering around US$4.91/bushel, after declining to around US$4.65/bushel last week.

 

A supply crunch in feed wheat due to an ongoing drought in the Black Sea region is also prompting some Asian feed millers to purchase more corn.

 

"The concern everywhere is that this under-US$5-a-bushel corn level may not last, and hence there has been a rise in buying activity," a Singapore-based executive at a commodities brokerage said.

 

Japan has locked in the prices of around 465,000 tonnes of its feed corn purchases for shipment in October to December in the past week, taking advantage the fall in the market.

 

"There hasn't been any significant new buying, but earlier purchases are being priced in by benchmarking them against current levels on CBOT," a Tokyo-based grain importer said.

 

Purchases are made by fixing a premium over CBOT futures. The premium is set at the time the purchase is agreed, and the buyer locks in the final price based on the CBOT level at a later date.

 

South Korea has bought at least seven corn cargoes totalling around 385,000 tonnes in the last 10 days, at cost-and-freight prices between US$269/tonne and US$286/tonne, trading executives said.

 

They said the country plans to buy another 550,000 tonnes in the next few weeks, for December-January shipment. South Korea is Asia's largest corn importer after Japan.

 

"South Korea has already covered around 50% of its corn import requirements for December shipment and 40% for January shipment," a Seoul-based importer said.

 

Countries in Southeast Asia with smaller requirements are also rushing to buy, and are looking towards India to meet their immediate needs.

 

Southeast Asian buyers have purchased more than 200,000 tonnes of new-crop Indian corn for shipment in November and December, with more deals in the offing.

 

"Deals in Indian corn have so far been anywhere between 200,000 tonnes and 300,000 tonnes," an executive at a global trading company said.

 

At least 100,000 tonnes of the corn is for bulk shipment and the rest will be delivered in containers, the traders said.

 

Cost-and-freight trades for Indian corn in containers have recently been finalised around US$254 a tonne to Ho Chi Minh City, Vietnam, US$247/tonne-$248/tonne for Port Klang in Malaysia and US$252/tonne for Indonesian ports.

 

Recent sales for bulk shipment have been done at US$260/tonne-$267/tonne, mostly for Vietnam, and current offers are around US$275/tonne-$277.50/tonne.