October 23, 2006

 

Asia Corn Outlook: Premiums may ease on CBOT futures

 

 

Premiums of wheat and corn delivered to Asia may ease a bit in the week ahead, as Chicago Board of Trade futures for both these commodities soften slightly.

 

Both wheat and corn futures have been on the rise since early October, with wheat futures touching a 10-year high on Oct. 4. However, over the past few sessions, both have started to cool off as market prices have absorbed a substantial portion of the good news.

 

Still, some analysts contend that Australia's severely reduced wheat output and lower U.S. corn output estimates may still support corn and wheat futures prices.

 

In Asia, active buying of corn and wheat should be seen in South Korea this week.

 

Last week, both feed companies and flour millers bought wheat and corn for the January-March 2007 quarter.

 

This week, South Korean flour millers are expected to continue buying U.S. No. 1 wheat in international tenders. At least one corn buying group, the Korea Corn Processing Industry Association, is expected to buy 110,000 metric tonnes of optional-origin corn.

 

In import deals last week, the Pusan branch of the Korea Feed Association bought 110,000 tonnes of optional-origin corn from trading house Cargill in private negotiations.

 

The Korea Corn Processing Industry Association, or Kocopia, bought 55,000 tonnes of optional-origin corn from Cargill in a tender last week.

 

The Taiwan Sugar Corp. also bought 35,000 tonnes of U.S.-origin corn from trading house Marubeni in a tender last week.

 

In wheat, four South Korean flour mills - Dongah, CJ Corp., Daehan and Youngnam - jointly bought 21,500 tonnes of U.S. No. 1 wheat from trading house Cargill in a tender last week.

 

Three other South Korean flour mills - Daehan, Daesun and Samhwa - also jointly bought 23,800 tonnes of U.S. No. 1 wheat from Cargill in a tender last week.

 

Meantime, Japan's Ministry of Agriculture, Forestry and Fisheries bought 125,000 tonnes of U.S. and Australia-origin wheat in a tender last week.

 

There was speculation on whether Japan's government would get offers for its bid to buy Australian wheat, given the severe reduction in wheat crop expected due to the drought. But eventually, the government did get offers to supply 55,000 tonnes of wheat.

 

In Australia, some analysts are forecasting a national wheat crop of around 10 million tonnes, down about 60% from 25 million tonnes produced last crop year (April 2005-March 2006).

 

There has even been talk of the crop falling to as low as 6 million tonnes.

 

With ongoing annual domestic demand of about 5.5 million tonnes, the drought leaves little for export.

 

In other news, around 2.1 million tonnes of the total 5.5 million tonnes of wheat that India's state-run State Trading Corporation, or STC, has bought since March has already arrived at various Indian ports.

 

STC has no plans to issue any fresh wheat import tenders in 2006.

 

Another 10 shipments carrying 552,152 tonnes of wheat bought by the STC are expected to arrive by Nov. 15.