July 23, 2012

 

India's port congestion delays corn, rice shipments to Asia, Africa

 

 

As a worsening US drought threatens to spark a shortage in food supply, congestion at Indian ports is delaying corn and rice shipments to Asia and Africa, dealing a fresh blow to buyers stung by record-high global grain prices.

 

Ships faced up to 25 days of waiting at ports on India's east coast, traders and port officials said on Friday (July 20), delaying cargoes to millers who are heavily relying on cheaper South Asian shipments amid tight US and South American supplies.

 

"There is a lot of congestion at Vizag and Kakinada ports, some shipments are facing delays of around 20-25 days," said one Singapore trader. "It can be a problem for buyers who are short in supply."

 

US front-month wheat futures have surged more than 11% so far this week, rising for a fifth consecutive week, while corn has gained almost 8%. Corn prices hit a record high on Thursday (July 19) as the drought in the US farm belt, the worst in 56 years, continued to dent crop yields in the top exporter of the grain.

 

While lack of berths was leading to delays at the Vizag port, insufficient barges was holding up operations at the Kakinada port which had 22 vessels at anchor on Friday (July 20), waiting to load corn and rice.

 

"Loading is very slow at Kakinada and the monsoon season will only worsen the problems," said another Singapore trader.

 

Indian exporters are actively selling corn to Indonesia, Malaysia and Vietnam. Corn exports from India could hit a record 3.5 million tonnes in the 2011-12 marketing year to September, spurred by higher global prices and a bumper harvest. Indian corn is quoted at US$310 per tonne, on a cost and freight basis, into Southeast Asia while Argentine corn is quoted at US$340 per tonne.

 

African buyers are snapping up rice cargoes from India which has sold some five million tonnes since export curbs on common varieties of rice were eased in September. Indian port congestion, which started this month, could ease next month, however.

 

"I think there will be less congestion after a month as corn exports are declining due to lower domestic supplies," said Sanjeev Garg, chief executive at agricultural products trading company CommCorp International in New Delhi.

 

More than half the US was experiencing moderate drought or worse this week, according to the latest US Drought Monitor report issued on Thursday (July 19). More than 70% of the Midwest Corn Belt was in some stage of drought in the week ended July 17, up from 63% a week earlier. It adds up to the worst drought conditions in the US since at least 1956, climate experts said. As a result, the prices of US and Australian wheat being offered in the Asian grain market have climbed around US$35 to US$40 a tonne in the last week.

 

Corn buyers in Asia, who account for just under half of the world's imports, have been caught on the wrong side of the market. Most importers, including top buyer Japan are not covered for October-December shipments.

 

A flour miller in Indonesia bought Indian wheat this week after a month-long gap, while Vietnamese buyers are seeking grain shipments as Asian importers trickle back to the market with no let-up in the US drought.

 

The Indonesian miller bought 25,000 tonnes of wheat from India for shipment in August-September and processors in Vietnam are seeking wheat, corn and soymeal cargoes for arrival in the next two months.

 

"We have seen some demand coming from Vietnam, where millers are looking for smaller cargoes of 6,000-10,000 tonnes," said one trader with a global trading company in Singapore.

 

"Some are still postponing their purchases but there are a few who really need to buy for August shipment, so they have no choice."