December 5, 2005

 

Asia Corn Outlook: Premiums likely unchanged; flat demand

 

 

Premiums of wheat and corn delivered to Asia are expected to remain unchanged in the week ahead as demand may remain at current levels, or even fall a bit.

 

"Corn demand is quite steady in South Korea, and not much change can be expected in the coming weeks," said a trader in Seoul.

 

Ocean freight rates seem to be bottoming out with further falls unlikely, the trader said.

 

Spot ocean freight rates for panamax-size cargoes from the U.S. Gulf to South Korea is around $40 a metric tonne this week, compared with $42-43/tonne last week.

 

In Japan, traders said demand for wheat has been a bit lower from both bakeries and noodle makers, though they couldn't pinpoint any specific reason for such a decline.

 

Besides, traders added that the Japanese government is also seeking to reduce its wheat imports due to the accumulation of stocks at ports.

 

In major deals last week, the Busan branch of South Korea's Korea Feed Association, or KFA, concluded a tender Friday to buy 60,000 tonnes of origin-optional feed corn from trading house Toepfer.

 

Toepfer will supply either Chinese corn for $126.98/tonne or U.S. corn for $129.98/tonne, for March 10 shipment to the port of Ulsan.

 

Last week, Taiwan's Great Wall Enterprise Co. Ltd. bought 60,000 tonnes of U.S. No. 2 yellow corn from trading house Bunge.

 

The company will pay a premium of 137.5 U.S. cents/bushel over the Chicago Board of Trade March contract for 40,900 tonnes, while the rest of the shipment will cost $132.9/tonne, cost and freight, to be shipped in December and January.

 

South Korea's Major Feedmeal Group, or MFG, bought 110,000 tonnes of U.S. No. 2 corn from trading house Cargill for April 5 delivery to either the port of Pusan or Kunsan.

 

Meantime, the Taiwan Flour Millers Association said Monday that it will conclude a tender Wednesday to buy 80,000 tonnes of U.S. No. 1 wheat for January shipment.

 

Falling Grain Prices To Hit Farm Incomes In China

 

Chinadaily.com reported Monday that falling grain prices in China combined with rising input costs may limit gains in farm incomes in 2006, China's economic planning chief Ma Kai said at a weekend conference.

 

Ma said the prices of wheat, corn and rice in China have fallen 5% in the August-to-October compared with the same period last year.

 

Farmers' incomes are expected to rise 5% in 2005, hitting the target set by the government, added the report.

 

The National Australia Bank said in an analyst report Monday that there have been speculations in the U.S. about whether an upcoming Chinese wheat delegation will buy U.S. wheat.

 

However, the report added, "Given the government handles most of the imports (in China), one would think that if purchases of U.S. (wheat) do happen, they would wait until the renminbi(yuan)/dollar spread is narrowed."

 

Meantime, U.S. wheat and corn futures had a mixed performance last week, with some price gains Nov. 30 and Dec. 1 for both. They, however, settled lower Friday.

 

Analysts said that while corn futures are looking underpriced and ready for some bounce in the coming weeks, good weather for the U.S. winter wheat may lead to losses on wheat futures.