June 2, 2006

 

Asia Corn Outlook: Premiums to keep rising on CBOT

  

 

Premiums for wheat and corn in Asia are likely to rise in the week ahead, as CBOT futures for both these commodities may gain on weather concerns for the U.S. crop and continued gains in crude oil. While both corn and wheat futures were lower for most of last week, both these futures rebounded on Friday on weather concerns for both corn and wheat crops, besides the rise in crude oil futures.

 

For wheat, weather concerns in Australia, a major wheat exporter, also underpinned gains in CBOT futures.

 

Many of Australia's winter cropping areas, including wheat and barley, have suffered a dry start to 2006, with large areas in the east experiencing rather poor to record low autumn rainfall.

 

This is the sixth successive year that significant parts of southeastern Australia have recorded a dry autumn.

 

Demand for wheat in Asia is expected to remain quite buoyant in the week ahead.

 

Taiwan Flour Mills Association is seeking 70,470 metric tonnes of U.S. No. 1 wheat for July 6-27 shipment in a tender to be concluded on Tuesday, an association official said Monday.

 

Meantime, Japan's Ministry of Agriculture, Forestry and Fisheries is also likely to seek wheat in their weekly tender on Tuesday, after a one-week gap.

 

In wheat import deals last week, South Korea's Dongah and CJ Corp jointly bought 20,500 tonnes of U.S. No.1 wheat from trading house Cargill in a tender concluded last week.

 

Corn demand in South Korea remained buoyant last week with two major tenders being concluded.

 

The Korea Corn Processing Industry Association, or Kocopia, bought a total of 110,000 tonnes of optional-origin corn from trading house Cargill in a tender concluded last week.

 

South Korea's Nonghyup Feed Inc., or NOFI, bought three 55,000-tonne cargoes of U.S.-origin corn from trading houses Cargill, Mitsubishi and Louis Dreyfus in a tender last week.

 

At present, premiums for corn delivered to South Korea from U.S. is 118 U.S cents/bushel above the CBOT July contract.

 

Meanwhile, a recent deal by China's Shandong-based Xiwang Sugar to buy 50,000 tonnes of U.S.-origin corn has heightened market speculation on more such imports by China, which until 2005 was a major corn exporter. "U.S. feed grain producers have been waiting for this development. The U.S. Grains Council (an industry lobby group) has been working in China for a number of years and we're happy to see private importers buying U.S. corn," Kenneth Hobbie, USGC president and CEO said in a press statement.

 

"Time will tell if more imports of U.S. corn are contracted, but in the meantime we're pleased with this first step," he added.

 

In other news, last week, State Trading Corp. of India finalized deals to import 800,000 tonnes of wheat from two companies, AWB Ltd and Agrico, at US$187-US$199.2 a tonne, cost and freight.

 

"We will buy 500,000 tonnes of wheat from Australia's AWB at US$187/tonne and 300,000 tonnes from Swiss company, Agrico Trade and Finance at three prices between US$198.2 and US$199.2 a tonne," the STC official told Dow Jones Newswires.

 

Also, India's food ministry is seeking approval from the country's federal cabinet to relax the quality specifications for a third tender to import around 2.2-2.3 million tonnes of wheat.

 

Stringent quality and financial conditions resulted in a poor response to India's 3-million-tonne wheat tender in early May, ending with the purchase of only 800,000 tonnes of wheat.