November 15, 2011
Amidst tight supply in the US, Asian corn prices will likely be declining in the coming months as buyers shift to other origins and substitute grain with feed wheat, trade participants said.
Corn may register modest gains from time to time, but prices of the grain will remain subdued overall, they said.
The near-month corn contract on the CBOT is currently trading around US$6.40 a bushel, down 20% from an all-time high reached in June--most traders and analysts expect prices to fall to US$6.00/bushel.
Prices did fall below US$6.00/bushel briefly six weeks ago.
"The last time we saw buying interest surge on corn was at the US$6-a-bushel level, and that is when China made their last (significant) bookings, a decline again is quite plausible," Iowa-based MaxYield Cooperative analyst Karl Setzer said.
Cheaper availability of animal-feed-grade wheat is also affecting demand for corn, as it can be used as a direct substitute.
Many traditional US corn buyers are shifting towards wheat and corn from the Black Sea region and Australian wheat as both are cheaper, Setzer said.
It has now become the norm rather than a rare phenomenon for corn to trade at a premium to wheat on CBOT, said Abdolreza Abbassian, Rome-based secretary of the UN Food and Agriculture Organization's Intergovernmental Group for Grains.
On a delivered basis, Australian feed wheat currently costs as much as US$70/tonne less than US corn.
Last week, US corn for February shipment to East Asia was offered around US$338-344/tonne, cost and freight, while Australia has sold C&F feed wheat at US$266-274/tonne in the last 10 days.
The US is also facing stiff competition from corn of other origins such as India and Ukraine, which are harvesting bumper crops.
Due to high prices, Ukraine is growing corn like never before, switching acreage from other crops as well as bringing in additional land, Abbassian said.
The International Grains Council expects Ukraine's corn production in the crop year that started July 1 to rise 57% to 18 million tonnes. Abbassian said it may even touch 20 million tonnes.
Traditional US corn buyers Japan and Taiwan are purchasing the grain from the Ukraine, US Grains Council Senior Regional Director for the Mediterranean and Africa Cary Sifferath said in a report last week.
Vietnamese animal-feed miller Proconco Producing Animal Feeds Joint Stock Co. has purchased 25,000 tonnes of Indian corn, paying around US$288/tonne for January-February C&F shipment.