February 6, 2006

 

Asia Corn Outlook: Premiums may rise on US futures

 

 

Premiums of corn and wheat delivered to Asia may rise in the week ahead on expectations of further gains in U.S. corn and wheat futures.

 

Both U.S. wheat and corn futures rose most of last week, fueled by weather concerns for the global wheat crop and fund buying.

 

Analysts said wheat crop woes in the U.S. and Black Sea regions are likely to keep fueling the rise in wheat futures, which could also see corn futures gain in sympathy.

 

Besides, spot ocean freight rates rebounded in some major Asian destinations, after falling for several weeks.

 

A trader in Seoul said spot ocean freight rate for panamax cargo is at present $33 a metric tonne for the U.S. Gulf to South Korea route, up $2 from last week.

 

On the Asian demand side, a Seoul trader said most corn importers are waiting for any announcement of fresh corn export quotas by China, before making any export commitments.

 

American analysts said China's corn exports are likely to fall in 2006 after sharp gains in 2005, as domestic corn prices may remain healthy.

 

On the wheat demand side, Japan bought less in its weekly auction Thursday than it previously announced.

 

The country's Ministry of Agriculture, Forestry and Fisheries originally said it would buy 125,000 tonnes of wheat, but ended up buying only 80,000 tonnes. It didn't give any reasons for the reduced purchase.

 

Meanwhile, India finally decided to import 500,000 tonnes of wheat after waiting for several months even as domestic wheat shortage worsened and wheat prices rose sharply.

 

India had last imported wheat in 1999.

 

However, farmers and opposition politicians dubbed the government's move to import wheat as bizarre and ill-timed, coming as it does just a month before harvesting of wheat will begin across the nation.

 

"The government's recent decision to import wheat raises questions about the timing of the decision as well as the larger issue of inefficient management of wheat procurement in the country," said an editorial in the Financial Express daily.

 

U.S. analysts said India is most likely to import the wheat from Australia, though the government hasn't made announcement about the cost or origin of the imported wheat.

 

However, a French trader told Dow Jones Newswires: "The E.U. market is currently the most competitive in the world while freight rates have come down. It depends how the tender is done, but if it's through local private licensees, E.U. wheat has a 50-50 chance."

 

Meanwhile Australia's monopoly wheat exporter AWB Ltd. continues to face criticism over alleged kickbacks paid to the Saddam Hussein regime for sale of wheat under the United Nations' oil-for-food program.

 

U.S. wheat lobby group, U.S. Wheat Associates, has called on the U.S. Senate to investigate the kickbacks.

 

"There are a number of threads that tie these issues to U.S. law," and U.S. producers have been affected by AWB's illicit payments, U.S. Wheat Associates President Alan Tracy told Australian Broadcasting Corp. radio.