October 16, 2008

Malaysia has bought around 60,000 tonnes of corn from Argentina in its first deal in nearly two months and at almost half the price it paid in August, according to traders.

Malaysia is Southeast Asia's biggest corn importer, buying about 3 million tonnes of corn each year, and the current deal provides for the grain, purchased at US$220 per tonne cost and freight and to be delivered in November. More than US$400 was paid for in August for similar corn.

The country reduced purchases in August and September because it had overbought after India, the key corn supplier in Asia, put a ban on exports in July.

India, which sells around 3 million tonnes of corn a year, has emerged as an important supplier to Southeast Asia, delivering prompt shipment at much lower freight costs than the US and Latin America.

Chicago corn prices, the global benchmark for grains, have dropped 46 percent since hitting an all-time high of US$7.65 per bushel in June when floods in the top-growing US Midwest region threatened crops.

The front-month corn contract fell below US$4 on Monday to its weakest position in 10 months, which traders said was well below the cost of production of US$5-US$5.5 per bushel.

A huge drop in freight costs has added to the decline in cost of imported grains. The Baltic Exchange sea freight index for shipping raw materials such as iron ore and grain has plummeted more than 80 percent from a record high in May.