December 19, 2005

 

Asia Corn Outlook: Premiums likely unchanged; flat demand

 

 

Premiums for wheat and corn delivered to Asia are likely to stay unchanged in the week ahead, as demand remains flat and ocean freight rates stabilize.

 

Traders in Taiwan and Korea said they are in no hurry to buy corn or wheat, since the world market is quite well stocked.

 

A large part of buyers' confidence stems from expectations of a sharp rise in China's corn exports over the next few months. Bird flu has cut feed demand and freed up corn for exports.

 

Talk has been circulating in the market over the past several days that China has issued 4 million metric tonnes worth of corn export quotas for early next year, and that the government will provide a subsidy of RMB140 for each tonne of corn exported.

 

A report by the National Australia Bank said China exported 470,000 tonnes of corn in November. It added that China's January-to-November corn exports were at 8.05 million tonnes, a fourfold increase compared with the same period last year.

 

"The market situation for corn is very fluid. Most buyers are just waiting to see how much prices fall over the next few weeks, before taking a decision on imports," said a trader in a major Seoul-based feed-buying company.

 

He said most South Korean buyers are likely to prefer Chinese-origin corn over U.S. corn, because of lower prices and freight costs.

 

A trader in Taipei said demand for corn and wheat in Taiwan is still flat, and that not much trading activity is seen in the week ahead.

 

In China, domestic corn prices are rising, as export prospects seem bright for corn while domestic feed demand too is showing early signs of improvement as bird flu worries ease.

 

China hasn't reported any fresh outbreaks of bird flu in its poultry population so far in December.

 

Meanwhile, spot ocean freight rates from the U.S. Gulf or Pacific Northwest to Asian destinations such as Taipei and Seoul seem to be stabilizing after several weeks of falls.

 

India's Domestic Wheat Prices Rising, Imports Likely

 

In major deals over the week to Wednesday, Japan's Ministry of Agriculture, Forestry and Fisheries bought 141,000 metric tonnes of wheat from the U.S., Canada and Australia.

 

The Korea Corn Processing Industry Association bought 107,500 tonnes of optional-origin corn from trading houses Cargill and Glencore.

 

While 52,500 tonnes of Chinese-origin corn will be supplied at $138.87/tonne, cost and freight, the remaining quantity will include U.S. and South American-origin corn, to be supplied at $144.87/tonne, C&F.

 

Taiwan's Great Wall Enterprise Co. bought 60,000 tonnes of U.S.-origin corn from trading house Cargill. While 21,454 tonnes was bought at $136.11/tonne, cost and freight, the remainder was bought at 142.73 cents a bushel over the Chicago Board of Trade's March contract.

 

Meanwhile, Indian analysts continue to speculate on when the government will begin wheat imports.

 

An analyst report by the National Commodities and Derivative Exchange, one of India's three national futures exchanges, said the current stock of wheat with the government is very low, at 7.4 million tonnes.

 

It said the stocks will touch 1.4 million tonnes in the next four months, which would be the lowest in two decades. That may prompt the government to allow wheat imports soon.

 

The new wheat crop, currently being sown, will only hit the market by early May.

 

The report said India's cash wheat prices have risen around 19% in the last three months, and a further rise in prices may take place if wheat stocks keep falling.

 

"There thus exists the likelihood that the government might have to resort to sizable imports (of wheat) for the first time in six years," the report said.