November 27, 2006

 

Asia Corn Outlook: Premiums may rise on CBOT gains

 

 

Premiums of corn and wheat delivered to Asia may rise in the week ahead, as Chicago Board of Trade corn and wheat futures look likely to continue building on gains that began early October.

 

Over the past week, both wheat and corn futures ended mostly higher on a host of factors, such as technical strength, fund buying and overall bullishness in commodities.

 

In Asia, it's unlikely that traders will step up corn or wheat purchases, as prices remain in a rising trend.

 

Last week, only one major corn import deal was reported. The Korea Corn Processing Association, or Kocopia, bought 110,000 metric tonnes of optional-origin corn in a tender.

 

China-origin corn is selling at a discount of US$10/tonne to U.S. corn.

 

Separately, Japan's Ministry of Agriculture, Forestry and Fisheries bought 170,000 tonnes of wheat from the U.S., Australia and Canada in a tender concluded last week. Japan's agriculture ministry has continued to buy wheat in weekly tenders over the past few weeks, despite concerns of reduced Australian wheat exports this year because of a drought-ravaged crop.

 

Meantime, three South Korean flour mills - Daehan, Daesun and Samhwa - jointly bought 21,200 tonnes of U.S. No. 1 wheat from trading house Mitsui in a tender last week.

 

In other news, Indonesia's corn imports are expected to rise to a record 1.6 million metric tonnes this year, more than three times the 500,000 tonnes imported in 2005, led mainly by a sharp decline in domestic output.

 

"The industry is talking of a record high corn import of 1.6 million tonnes, as production has been so low this year," A Ali Basry, country representative for U.S. Grains Council in Indonesia told Dow Jones Newswires.

 

According to industry estimates, Indonesian corn output this year may only total 6 million-7 million tonnes, down sharply from 8 million tonnes produced in 2005.

 

Basry said the current dry spell in Indonesia may be a cause for concern for the corn crop that will be harvested early next year.

 

"There hasn't been much rain so far since last month. It's not definite when rains may come and sowing of the corn crop has already been delayed," said Basry.

 

Indonesian farmers sow rice, corn and other crops from October-November, when monsoon rains usually begin. However, rainfall has been scant so far this season.

 

Over in India, wheat planting covered 11.3 million hectares in the Oct. 1-Nov. 24 period, compared to 9.6 million hectares in the same period of last year, according to data provided by the Ministry of Agriculture Monday.

 

India's wheat crop will be sown until December and harvested in February and March.

 

The rise in wheat sowing so far can be regarded as good news for the federal government, which has said in several public statements that it aims to not import any wheat in 2007.

 

India's state-owned companies and private companies have imported 6.5 million tonnes of wheat so far this year, after being self-sufficient for the six preceding years. This has led to criticism of mismanagement of the country's farm sector by opposition parties and the government's Leftist allies.