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December 6, 2011

 

Asian corn prices to soften as import demand wanes

 

Asian corn prices will likely fall this month because of slow moving import demand, particularly from China, while grains are offered at lower prices by the European and South American exporters, trade participants said.

 

The most active March corn contract on the Chicago Board of Trade may fall to US$5.75/bushel from the current level of around US$5.95, they said.

 

China seems to have miscalculated by purchasing corn at higher levels earlier this year, assuming that prices would continue to test record highs, Okato Shoji Co. Deputy General Manager Koname Gokon said.

 

The country is taking delivery of these cargoes at a time when prices have declined sharply, he said.

 

Earlier this year, China was importing corn to replenish state reserves when CBOT futures were hovering around US$7.00/bushel. Prices even hit a record high of almost US$8.00/bushel in June, with Chinese demand being one of the main drivers--the other being tight supply in the US, the world's No. one exporter.

 

Supply tightness has eased on the back of bumper harvests in several European countries and in anticipation of a large crop in South America.

 

China's own 2011 corn output exceeded expectations, increasing 8.2% to 191.75 million tonnes in 2011, according to a government estimate, and domestic prices have eased since hitting records in September.

 

"In hindsight, if China is buying corn only for emergency stockpiling, now would be the time to do so, but it seems the government didn't anticipate that European corn would damp market sentiment," a Singapore-based executive with a global commodities trading company said.

 

It is unlikely that China will return to the import market anytime soon, he said.

 

China may have purchased close to four million tonnes corn between March and July, according to a private trade and analyst.

 

Japan, the world's largest importer, has stepped up purchases of European corn, which is trading at discounts as wide as US$25/tonne to US corn.

 

Taiwan will likely receive its first cargo of new-crop Ukrainian corn within the next two weeks, the US Grains Council's country director for Taiwan, Clover Chang, said Friday.

 

South Korea bought food-grade corn last month at US$291.88/tonne, cost and freight, with the origin likely to be European.

 

Traders expect the USDA to revise upward later this week the country's corn inventory projection for the end of the marketing year on August 31 from the current forecast of 21.42 million tonnes.

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