May 27, 2009

Japan and South Korea are likely to buy more corn from the US in the near term due to diminishing supplies from drought-stricken South America, traders said Tuesday (May 26).

 

The two countries account for about 30 percent of the corn traded in the world mainly from the US. Japan buys about 16 million tonnes of corn per year, while South Korea buys about 7.5 million tonnes.

 

Japan and South Korea turned to Brazil and Argentina for corn imports when South American supplies peak after harvests in May and June.

 

But a severe drought in South America, especially in Argentina, has limited exports so Japan has no choice but to buy US corn, a Tokyo-based trader said.

 

The USDA weekly data shows corn exports to Japan and South Korea rose in May, though overall sales were lower than average.

 

Traders expect Japan to buy two million tonnes of corn in the weeks ahead for July-September delivery and importers are looking at US supplies. A trader said they have booked about 1.8 to two million tonnes for July-September and nearly all are US corn, as Brazil and Argentina supplies are unavailable and Black Sea corn is not of the quality they wanted.

 

South Korea has booked 550,000 tonnes of corn this month for shipments up to November, out of which 165,000 tonnes are of optional origin and the rest are US corn.

 

But as there is little supply from South America, even optional purchases recently signed by South Korean feedmakers tend to be sourced from the US, a Seoul-based trader revealed.

 

China, the world's top soy importer, has also turned to US supplies due to lack of South American soy supplies.

 

Argentina is likely to produce around 12.7 million tonnes of corn, down 42 percent from the last harvest, according to the Buenos Aires Grains Exchange.

 

USDA estimated Brazil's corn production to drop to 50.5 million tonnes from last year's 58.6 million tonnes.

 

CBOT corn Cc1 rose to a seven-month high on May 20, driven by wet weather delaying US plantings amid fresh flow of speculative money into commodities. But corn fell on profit-taking on Tuesday, with July corn CN9 trading 1.6-percent lower at US$4.23-1/2 per bushel.