November 13, 2006

 

Asia Corn Outlook: Premiums may remain unchanged

 

 

Premiums of corn and wheat delivered to Asia may remain unchanged in the week ahead, as analysts believe that Chicago Board of Trade futures in both commodities may be consolidating after posting gains since late-September.

 

Over the last two sessions, both wheat and corn futures ended lower largely because of funds selling on technical factors. However, fundamentals remain strong for both U.S. corn and wheat.

 

While the U.S. Department of Agriculture has cut estimates of U.S. corn yield and ending stocks, a severe reduction in the Australian wheat crop due to drought may continue to benefit U.S. wheat sales.

 

In Asia, the major news last week was China's National Development and Reform Commission issuing 4 million metric tonnes of corn export quotas, according to a trader at state-owned Jiliang Group Co., a major corn exporter.

 

The quotas have been issued to traders who have already booked corn export shipments since late September.

 

China's exporters can't ship corn out of the country without export quotas.

 

In September and October, Chinese grain companies signed contracts to export over 4 million tonnes of corn for delivery late this year and early next year, according to local traders.

 

China exported 2.37 million tonnes of corn from January to October, down 68.7% on year, Chinese customs data showed.

 

But China's federal government is unlikely to issue corn export quotas for fresh corn exports over the next few months, as it doesn't want to jeopardize domestic supplies.

 

In China's local markets, corn prices are rising as demand is increasing from corn processing companies and feed manufacturers, especially in northern provinces such as Shandong.

 

As the scourge of bird flu recedes in China, livestock farmers are busy increasing their production, anticipating higher consumer demand in the coming months.

 

Corn buying had been rather slow from major buyers last week, such as South Korea and Taiwan, as traders expect CBOT corn futures to cool down. With signs of consolidation in CBOT corn futures, South Korean and Taiwanese corn processors and feed buying groups may step up their corn purchases over the next few weeks.

 

Last week, only two major deals in corn were reported.

 

South Korea's Nonghyup Feed Inc., or NOFI, bought up to 165,000 tonnes of optional-origin corn in a tender last week.

 

Over the last two weeks, NOFI bought 275,000 tonnes of corn, continuing to cover its needs up to May, 2007.

 

Taiwan Sugar Corp. bought 35,000 tonnes of U.S.-origin food corn from trading house Marubeni last week.

 

At present, the premium for corn delivered to China from the U.S. is 186.76 U.S. cents/bushel to the CBOT March contract.

 

In wheat too, two major deals were reported last week.

 

South Korea's NOFI bought 104,000 metric tonnes of optional-origin feed wheat in tender last week.

 

In Japan, the Ministry of Agriculture, Forestry and Fishers bought 40,000 tonnes of Australian wheat in tender last week.