May 21, 2012

 

Japan buys South American corn, dry weather spurs world wheat sales

 

 

Japanese feed millers purchased around 500,000 tonnes of corn for shipment between July and September, while rising global prices due to dry weather concerns prompted grain processors in the Philippines to buy 162,000 tonnes of feed wheat.

 

Buyers in Japan, the world's biggest corn importer, purchased about 300,000 tonnes from Brazil and around 200,000 tonnes from Argentina with premiums for South American grain cargoes firming on tight supplies.

 

Australian feed wheat prices have climbed to trade between US$285 and US$290 a tonne, including cost and freight, up from a cargo sold last week at US$270 a tonne.

 

"Buyers are getting concerned with so much volatility in the market," said one Singapore-based trader. "They are not rushing into the market yet to buy but if the market continues to rally next week, there should more buying interest."

 

US wheat was little changed on Friday (May 18) as the market took a breather after climbing to a six-week high in the previous session on fears that dry conditions in the United States and Russia could curb global supply. The benchmark July contract has jumped almost 10% this week.

 

Dry weather in Russia's key southern grain export regions may have inflicted irreversible damage on some of the crop, and a government source told Reuters that Russia may cut its 2012/13 grain crop forecast in May from the current 94 million tonnes.

 

There are also concerns that hot, dry weather this week could hurt the maturing hard red winter wheat crop in Kansas.

 

US front-month July corn has risen almost 7% this week, the biggest gain since October 2010, while July soy have risen 1.4% after two weeks of losses.

 

As a result, Argentine corn is being offered around US$300 a tonne in the Southeast Asian market, up from US$290 a tonne.

 

"Today I am offering South American corn to buyers in Southeast Asia at US$295 to US$300," said another trader. "Earlier this week it was possible to sell at even US$290 a tonne."

 

The feed wheat cargoes sold to the Philippines are for shipment between September and October.

 

A consortium of Malaysian feed millers is seeking 60,000 tonnes of corn for July arrival after having bought 40,000 tonnes of corn and 20,000 tonnes of soy meal for June shipment a couple of weeks ago.

 

Some traders were still offering lower prices than the current market value, after having bought from farmers at cheaper prices earlier.

 

"Wheat has moved very aggressively but some traders are selling Australian wheat quite cheap, maybe they have a long position in that market," the second trader said.

 

South American soy meal prices also climbed this week to US$550 a tonne on a delivered basis to Asia compared with US$535 a tonne last week.

 

"Normally, when the US grain futures go up, the premium for the South American cargoes come down, but what is happening now is that futures and premiums are going up in tandem," the trader said.

 

"Now they are taking about even lower output from Argentina and farmers are not selling."

 

Argentina cut its 2011/12 soy forecast to 41.5 million tonnes from 42.9 million last month and predicted 2012/13 wheat area would shrink nearly 14% from last season, the government said on Thursday (May 17).

 

Indian soy meal prices, which have climbed above South American values in the last few months because of Iranian buying, was offered at US$590 a tonne but there were no takers.