May 9, 2012

 

East Asian buyers purchase wheat, soy as prices drop

 

 

Due to the recent downward correction in prices and to cover their needs before any rebound due to tight supply, East Asian buyers are aggressively buying grain, particularly corn and soy, both for milling and animal feed use, trading executives and analysts said Tuesday (May 8).

 

Buyers in South Korea and Taiwan alone purchased close to 400,000 tonnes of grains Tuesday through tenders, and trading executives said deals involving a few hundred thousand tonnes were finalised privately so far this week, in countries such as Indonesia, China and Japan.

 

Most active July soy futures on the Chicago Board of Trade, which was near a four-year high above US$15/bushel at the end of April, has eased and is now trading around US$14.67/bushel. CBOT July corn and wheat contracts are now trading around US$6.27 and US$6.18/bushel respectively, down from US$6.3425 and US$6.5425/bushel in end-April.

 

South Korea's wheat buyers were active in both milling and animal feed wheat markets. A consortium of South Korean flour mills purchased a 36,100-tonne cargo of Australian wheat from Cargill for September 1-15 shipment.

 

The mills purchased a 70:30% blend of Australian Premium White and Australian Noodle Wheat around US$267/tonne, free on board, and Australian Hard grade around US$284/tonne, FOB, traders said.

 

Separately South Korean flour mills also bought two US wheat cargoes of 23,000 tonnes each from Mitsui and United Grain, respectively, taking total purchases to more than 82,000 tonnes.

 

In the deal with Mitsui, US Soft White grade with 9.5% and 8.5% protein, Hard Red Winter grade with 11.5% protein and Northern Spring grade with 14% protein at US$247.14/tonne, US$256.34/tonne and US$321.81/tonne, free-on-board, for shipment between July 20 and August 20.

 

South Korea's Major Feed mill Group purchased two cargoes totalling 112,000 tonnes optional origin feed wheat around US$272.30/tonne, basis cost and freight. It purchased one cargo from Cargill for arrival by September 10 and another from Mitsubishi for arrival by September 15, traders said.

 

Last week, South Korea's Feed Leaders Committee had purchased 55,000 tonnes optional origin feed wheat from Concordia at US$274.26/tonne, C&F, for arrival by September 25.

 

"Global wheat supply is ample but prices can still be driven up by corn and soy," said a trader in Seoul.

 

"The major expansion in US corn plantings is at the mercy of weather and even if the output shows a big rise, the incremental demand from China will neutralise part of the gains," said an executive with a Singapore-based commodities brokerage.

 

A large part of the US soy crop that will be harvested in August has already been booked by importers due to the South American drought, he said.

 

The Kaohsiung and Taichung branches of Taiwan's Breakfast Soy Procurement Association, both separately purchased a 60,000-tonne Brazilian soy cargo each from Marubeni and Concordia respectively for shipment between June 26 and July 10.

 

They bought the cargo at a US$3.333-a-bushel and US$3.2521/bushel premium over the CBOT November soy futures contract, C&F.

 

Importers are making purchasing benchmarked on CBOT November futures even though the shipment will be in June-July because the contract is trading around a US$1.13/bushel discount to the July contract. The November contract represents US new crop soy, which are now being planted and will then be available for export.

 

South Korea's MFG bought 60,000 tonnes South American soymeal from Glencore around US$524/tonne, C&F, for September 10 arrival.

 

Friday, Glencore had sold 55,000 tonnes South American soymeal to South Korea's largest feed miller, Nonghyup Feed Inc., around US$527/tonne.