November 21, 2005

 

Asia Corn Outlook: Premiums may fall on bird flu

 

 

Premiums of corn and wheat delivered to Asia are likely to fall this week, as corn demand is expected to keep falling on increasing bird flu concerns, while ocean freight rates have been declining and bearishness in U.S. wheat futures may persist.

 

"Corn premiums are expected to soften further as bird flu concerns will depress domestic demand in exporting countries such as China, as well as in importing nations such as South Korea," said a trader in Seoul.

 

Premiums for Chinese origin corn, which generally demand a higher premium than U.S. or Canadian corn because of their higher quality, are being squeezed because domestic demand for corn from the poultry industry has slipped, the trader said.

 

Monday, the Chinese government issued an emergency notice ordering regional authorities to install monitoring stations in all markets that sell poultry products, and to disinfect vehicles carrying poultry into these markets, China's CCTV.com reported.

 

The announcement follows an Associated Press report Monday, which said that China has reported its 16th and 17th bird flu outbreaks in poultry despite a massive effort to vaccinate the billions of farm birds in country.

 

A total of 3,676 birds died in the outbreaks in the northern region of Inner Mongolia and in Hubei province, while another 7,002 were destroyed in an effort to contain the virus.

 

However, the U.S. Grains Council is confident that world corn consumption will bounce back from bird flu concerns.

 

In a weekly report issued Nov. 18, Council Chairman Davis Anderson said that "bird flu is a concern, not a crisis."

 

Since poultry operations have short production schedules of around a month, quick turnaround of flocks can help boost feed consumption, he said.

 

Meanwhile, ocean freight rates continue to decline. Over the week, the spot ocean freight rate for panamax-sized cargoes from the U.S. Gulf to South Korea declined slightly to around $46/tonne, while spot ocean freight rates for shipment from the U.S. Gulf to Japanese ports remained flat at $45/tonne.

 

In the U.S., wheat futures were bearish all week, with contracts ending lower most days of the week. Unless exports bounce back sharply, wheat futures may not rebound this week, analysts said.

  

Indian Government Begins Trading On CBOT 

 

Meanwhile, in news that surprised market participants, a senior Indian government official told Dow Jones Newswires last week that government representatives have been trading wheat futures on the Chicago Board of Trade for more than a month, an unprecedented move.

 

However, the government official added that India had no plans to import wheat at the moment, contrary to market speculation over the past several weeks that said India may soon import wheat from Australia.

 

The Indian government also confused markets by releasing two conflicting sets of data on the status of wheat sowing.

 

Nov. 14, it said wheat sowing in the Nov. 1-14 period was around 2.8 million hectares, but Nov. 18, it issued another report saying wheat sowing in that period totaled 1.9 million hectares.

 

Thus far, the government hasn't issued any clarification on the data, but a fresh weekly update is expected late Monday, which may clarify the actual sowing position.

 

India's wheat sowing, which began Nov. 1, will continue until January 2006.

 

In other news, South Korea's Nonghyup Feed Inc. in a tender late Friday bought 142,000 metric tonnes of feed corn from China for end-February delivery.

 

The price, cost and freight included, ranged from $127.73/tonne to $133.25/tonne.