November 7, 2005

 

Asia Corn Outlook: Corn premiums may fall; wheat up

 

 

Premiums for corn delivered to Asia are expected to remain lower in the week ahead, while wheat premiums may rise, traders said Monday.

 

"Domestic demand for wheat is rising in West Europe, which is pushing prices higher," said a trader in Taiwan.

 

European cash wheat prices were steady to slightly higher Friday.

 

French new-crop standard wheat was mostly quoted at EUR105.50 to EUR106.00 a metric tonne delivered spot at Rouen, flat to up EUR0.50 on the day. B-Quality German wheat was steady, priced mostly at EUR106.00/tonne to EUR107.00/tonne delivered spot at Hamburg/Rostock, depending on shipment size.

 

The Taiwanese trader added that demand for wheat is also higher in Canada, another major producer.

 

Fundamentals of wheat aren't likely to change much in the coming days and this promises a firm price trend for the commodity, he said.

 

U.S. wheat futures settled mixed Friday as Kansas City Board of Trade wheat firmed on the U.S. Department of Agriculture's report that 800,000 metric tonnes of U.S. hard red winter wheat had been sold to Iraq, and Chicago wheat was mixed after index funds actively rolled over their nearby December positions.

 

Cash spot U.S. SRW wheat basis bids were steady to firm Friday, with an 11 1/2-cent gain in Cincinnati and a 14-cent gain in St. Louis.

 

While the outlook for wheat prices remains firm, corn prices on cost-and-freight basis are likely to fall, while the prices on free-on-board basis are expected to remain steady, a South Korean trader said.

 

Taiwan Flour Millers Association bought 92,250 tonnes of U.S. No. 1 wheat from trading house Columbia Grain in a buy tender concluded Thursday, with prices ranging from US$139.39/tonne to US$191.74/tonne.

 

Ocean freight rates to both Taiwan and South Korea from U.S. ports have fallen over the past seven days, which has led to weaker corn prices, cost, insurance, freight, said traders.

 

However, several traders in Asia said ocean freight rates may rise over the next three to four months, as increased shipments of coal in the winter months may push prices higher.

 

The spot ocean freight rates of panamax-sized cargoes from the U.S. Pacific northwest to Taiwan has fallen to US$24/tonne from US$26/tonne a week ago, a second Taiwan-based trader said.

 

"A US$2 drop in freight rate is quite a fall and we expect such weakness to continue pressuring CIF premiums," he said.

 

According to a Seoul-based trader, spot freight rates from the U.S. Gulf to South Korea has fallen from US$50/tonne to around US$45-46/tonne in the last seven to 10 days.

 

Corn futures on the Chicago Board of Trade settled mostly lower Friday, with nearby futures slipping to new contract lows in late trade.

 

There isn't much happening in corn futures, which continue to consolidate at lower levels, traders said.

 

December corn fell 3/4 cent to US$1.95 1/2 per bushel, March corn also slipped 3/4 cent to US$2.09 3/4 per bushel, and May corn dropped 3/4 cent to US$2.17 3/4 per bushel.

    

Favorable Conditions For Wheat Crop In India, China

  

Meantime, weather forecaster Meteorlogix said weather conditions remain quite favorable for sowing of wheat in India and Pakistan, both major wheat producers and consumers in Asia.

 

"Soil moisture and irrigation should be adequate for early developing wheat," said Meteorlogix.

 

There has been a fair amount of speculation in the Asian grains trading circle over India's intention to import wheat in the next few months.

 

However, the Indian federal government has denied any such action, pointing to ample domestic stocks of rice and wheat.

 

India's wheat crop is sown from November to January and harvested in February and March.

 

Meteorlogix added that a recent spell of dry weather has improved field work conditions for winter wheat in China.

 

"Soil moisture should be favorable for this crop at this time," it said.

 

Sowing of winter crop is nearing completion in China.

 

In the Philippines, consumption of wheat and corn may fall in 2006, as poultry demand could falter on bird flu concerns, as well as a general slowdown in the economy.

 

According to the USDA, the Philippines consumes around 5.30 million tonnes of corn and 2.75 million tonnes of wheat annually and most of it goes into feed production, since milled rice is a staple food.