October 17, 2011
Asian corn prices get support from Chinese demand
Strong Chinese demand may give support to Asian corn prices while lesser availability of US corn and India and Thailand's poor weather are constricting the supply side, according to trade participants.
Traders tipped corn futures on the Chicago Board of Trade to sustain above US$6.00 a bushel and possibly test above US$6.50/bushel in the next few weeks.
Most-active CBOT December corn is now around US$6.40/bushel.
While China's corn purchases appear to be aimed at restocking state reserves, they come amid a bumper crop, signalling growth in overall consumption, which could tighten global fundamentals, an executive at a Tokyo-based commodities brokerage said.
The USDA confirmed Thursday sales of 900,000 tonnes corn to China.
"We estimate China will take no less than 2.4 million tonnes of US corn" in the marketing year ending August 31, Citigroup analyst Terry Reilly said.
This doesn't account for US sales of around 4.7 million tonnes to unknown destinations, anywhere between 750,000 tonnes and 1.5 million tonnes of which may be for China, he said.
Another trader said Chinese buying will result in US inventories eventually turning out to be lower than forecast by the USDA.
The USDA has maintained its forecast for China's 2011-12 corn imports at two million tonnes--most trading executives are expecting shipments of more than double this size, closer to five million tonnes.
Traders said China is now buying corn for shipment between April and June, when local supplies will have dwindled.
Indian corn is attracting demand from East and Southeast Asia.
The USDA forecasts US corn output this marketing year around 316 million tonnes, slightly less than last year, and expects US exports to fall 13% to 40.64 million tonnes.
Traders expect the shortfall to be offset by India, the Ukraine and central EU, boosting non-US global corn trade 25% to 53.5 million tonnes.
East Asian buyers have snapped up 500,000 tonnes of Indian corn in recent weeks, at FOB prices of US$248-285 a tonne.
Floods in Thailand have also pushed up demand for Indian corn.
Around 150,000 tonnes of Indian new-crop corn traded around US$250/tonne, FOB, before prices rose due to heavy rains in the southern states of Karnataka and Andhra Pradesh in the last few days, boosting FOB offers to US$255-258/tonne.