December 4, 2006

 

Asia Corn Outlook: Premiums may rise on US exports

  

 

Premiums for corn and wheat delivered to Asia may rise in the week ahead, as export prospects for both these commodities in the U.S. remain bright.

 

Meantime, a Barclays Capital analyst report last week said the rally in global corn prices isn't yet over.

 

"We believe the rally in corn prices is not over and continue to view prices with an upside bias," the report said.

 

The report said speculative money has been a major factor for the rise in corn futures, as funds have viewed corn favorably throughout 2006.

 

It added that another major source of demand-side pressure on corn is the rising amount of U.S. corn that is being used up for ethanol, instead of being exported.

 

In Asia, Chinese traders are finding it difficult to procure corn domestically to meet their export commitments.

 

Chinese traders are estimated to have exported much less corn in November than earlier expected, while December export projections have also been revised lower because of slower arrivals of domestic corn in markets, a report by the commodities analysis firm JCI Shanghai said last week.

 

While traders had earlier expected to export up to 700,000 metric tonnes of corn in November, actual exports may be around 350,000 tonnes at the most, said JCI.

 

December exports, earlier expected to be around 1.2 million tonnes, may now be 800,000 tonnes at most.

 

Since July, China has contracted corn export orders of around 4.5 million tonnes.

 

Over the past week, South Korean buyers were busy importing corn despite the high premiums.

 

However, one trading buying group Korea Corn Processing Association rejected all the bids for its corn purchase tender Thursday, as they considered the prices too high.

 

Among major deals last week, Korea Feed Association in Pusan bought 110,000 tonnes of optional-origin corn from trading house Cargill in a tender last week.

 

South Korea's Nonghyup Feed Inc. bought 212,000 tonnes of optional-origin corn in two separate tenders last week.

 

South Korea's Major Feedmill Group bought 55,000 tonnes of optional-origin corn from trading house Marubeni in a tender last week.

 

In all the optional-origin corn purchase tenders, Chinese corn was quoted at a discount of USUS$8-USUS$10/tonne to U.S. or South American corn.

 

In other news, India's wheat crop sowing is proceeding quite well and a senior government scientist said India's 2007 wheat output may hit 73 million tonnes, up 4.6% from the estimated output this year.

 

"There are several imponderables from now until the time harvesting happens. But if conditions remain favorable, we are looking at a good crop of 73 million tonnes plus," said B Mishra, projects director for India's Directorate of Wheat Research, located in the northern state of Punjab.

 

India is estimated to have produced 69.8 million tonnes of wheat this year, down from 72 million tonnes produced in 2005, leading to a sudden surge in imports after a gap of six years.

 

India's sowing of the wheat crop began in November, while harvesting takes place in March and April.