June 14, 2011

 

Asian purchases of grains slow down on price surge

 

 

Asian purchases of grains has slowed due to a surge in prices, as buyers are awaiting a downward correction before they make fresh purchases, trade participants said.

 

Buyers of both food and feed-grade wheat and corn have bought enough to cover their immediate needs, so they aren't in any hurry to make further purchases, they said.

 

"Corn futures on CBOT touched almost US$8 a bushel. At these prices, cargoes on a delivered basis for arrival in the next quarter are unlikely to cost less than US$390 a tonne," said a Singapore-based executive with a commodities trading company.

 

Such prices are unheard of so far in the global grains trade, so buyers prefer to wait even though the market still could have upside potential, he said.

 

Even new-crop US corn, to be shipped out in end-September, is available around US$365/tonne on a cost-and-freight basis to Southeast Asian ports.

 

Many importers have pinned their hopes on Ukraine, which may supply cheaper feed wheat and corn later this month, another trader said.

 

Ukraine has removed grain export quotas and instead levied export tariffs. The export tariffs on wheat and corn are at 9% and 12%, respectively.

 

Despite the tariffs, Ukraine's grain will be relatively cheaper, traders said.

 

It makes more sense to buy Ukraine's feed-grade wheat around US$325/tonne, C&F, than to import corn from the US, said an importer in Seoul, who said buyers are looking for cargoes to arrive in the September-December period.

 

South Koreans prefer to buy feed wheat with a test weight of 72 - an indication of the quality of the grain - which is available from Europe and Canada. Australian feed wheat has a lower test weight, though it can be increased through blending.

 

In Japan, world's largest corn importer, buyers are reluctant to finalise at current levels the prices of cargoes they purchased earlier on a premium basis to futures on CBOT.

 

"At least 25% of Japan's corn import needs for July-September are still uncovered," said a Tokyo-based trading executive.

 

According to trade estimates, final pricing has been completed for around 85% of the corn purchased by Japanese compound feed manufacturers for July shipment, around 50% for August shipment, and 20% for September.

 

The surge in US grain prices has also pushed up rates for Australian wheat by around US$15/tonne in the last two weeks, even though it is available in ample supply.

 

Australian Standard White grade with 9% protein was offered late last week around US$340/tonne, free on board, and Australian Premium White grade with 10.5% protein around $380/tonne, FOB.

 

Flour millers in Southeast Asia are well covered for their needs through July and purchases have been sluggish in recent weeks.

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