October 9, 2006

 

Asia Corn Outlook: Wheat premiums may gain; corn weak

 

 

Premiums for wheat delivered to Asia may rise in the week ahead as adverse weather conditions are likely to reduce output in major wheat producers Australia and Argentina.

 

For corn, premiums may remain at current levels or even fall slightly as there are expectations of a good U.S. corn crop, besides favorable weather for the ongoing corn harvest in the North American country.

 

At the Chicago Board of Trade, wheat futures leapt to a 10-year high last Wednesday, largely because of supply concerns for wheat globally.

 

Meantime, India's steadily rising wheat imports have hit a roadblock as major sea ports are facing massive congestion due to the arrival of several wheat shipments over the past several days.

 

Analysts fear that private companies may delay their wheat import plans unless port congestion eases significantly over the coming several days.

 

Indian federal government officials are quite concerned about the congestion at ports, as delays in the arrival of imported wheat at local markets may cause prices of wheat products, such as wheat flour and bread, to rise further.

 

Meantime, in an effort to boost sagging wheat output in the country, agriculture ministry officials have sought an INR1,000/tonne hike in the state-set wheat intervention price, which is currently at INR7,200/tonne.

 

The cabinet is expected to arrive at a decision by November, before the wheat harvest begins.

 

India's federal government buys almost all the wheat that farmers are willing to sell at the intervention price. So far in 2006, the government procured less wheat, as private companies offered farmers prices that were higher than the government's intervention price.

 

Some of the government's key political allies, the leftist parties, have said that the government's reduced wheat buys is responsible for the country's rising wheat prices, as some private traders could be hoarding wheat to create artificial scarcity.

 

The leftist parties also allege that the government's reduced wheat procurement hampers state-run welfare programs for low income families, such as food for work programs.

 

In China, corn prices are likely to fall in the next few months as the country begins harvesting the new crop.

 

China's corn output is expected to total 141 million metric tonnes in the 2006-07 marketing year, which runs from October to September, up from 139 million tonnes in 2005-06, the China National Grain & Oils Information Center, a major government-backed think tank in the agricultural sector, said.

 

Corn demand is expected to reach 138 million tonnes in 2006-07, up 3.9% on year, added the research body.

 

Analysts said that corn prices may fall by around RMB100/tonne when the newly harvested corn enters the market.

 

In major deals this week, Japan's Ministry of Agriculture, Forestry and Fisheries has bought 106,000 tonnes of milling week in a tender concluded on Thursday.

 

The ministry bought 25,000 tonnes of Australian wheat to be shipped between Nov. 1-30 as well as 40,000 tonnes of U.S. wheat, 21,000 tonnes of Canadian wheat and 20,000 tonnes of Australian wheat to be shipped between Dec. 1-Jan. 10.