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November 19, 2008

                                   
Asia Grain Outlook on Wednesday: Corn prices may weaken on ethanol woes
                           

 

Corn prices are likely to remain pressured in the short term, as continued weakness in crude oil futures is darkening the outlook for ethanol.

 

U.S. media have reported that ethanol plants are sitting idle or are having difficulty finding new investors, and the lack of activity is likely to affect demand for the corn crop being harvested in the U.S., as most ethanol production in U.S. uses corn as a feedstock.

 

"It's gone from feast to famine," Jay Debertin, executive vice president of CHS Inc., an energy and agricultural cooperative, was quoted as saying by the U.S. daily Pioneer Press, about the state of the U.S. ethanol industry.

 

Apart from ethanol woes, corn is also having to fight it out with cheaper feed wheat, as the world has harvested a record wheat crop this year.

 

In Asia, South Korean feedmillers have been quick to substitute feed wheat for a large quantity of corn.

 

Je Hoon Lee, a feed buying manager affiliated with the Major Feedmill Group said that feed wheat is currently looking more attractive than feed corn. While feed wheat from Ukraine costs around US$150 a metric tonne, cost and freight, the cheapest corn - from South America - is available at US$190/tonne.

 

Most South Korean feed mills have completed soybean meal, corn and feed wheat purchases for up to February 2009 earlier this month and will likely start buying for March shipments this week onward, said Je Hoon.

 

In other news this week, the Vietnam Food Association signed a contract last week to export 100,000 metric tonnes of high quality rice to Malaysia.

 

In Vietnam's key rice-growing areas, traders are quoting indicative prices for high-quality 5% broken rice at US$400/tonne on a free-on-board basis, down from US$500 in October.

 

According to state-run media, Vietnam is expected to export 4.6 million to 4.7 million tonnes of rice this year, compared with 4.5 million tonnes in 2007.
                                                                  

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