October 21, 2010

 

Ukraine's grain export quotas to favour Asian grain market

Asia's wheat and corn prices are likely to be supported by Ukraine's curbs on grain exports and fresh demand in the physical market.

 

Earlier this week, Ukraine has fixed an export quota of 500,000 tonnes of wheat and two million tonnes of corn for the rest of 2010, to ensure ample domestic supplies and restrain local prices. The allocation of quotas is expected by next month.

 

Ukraine has been a major supplier of feed wheat to Asian countries such as South Korea, the Philippines, Indonesia and Vietnam for the last few years. These countries are now turning to central Europe, Australia and the US for their wheat needs, because Ukraine's exporters have cancelled orders for thousands of tonnes of exports.

 

"It isn't about wheat needs alone, part of the demand is getting substituted with corn and this will definitely support prices of the grains complex," said an analyst in Singapore.

 

The latest downward correction in futures prices on the CBOT is also likely to spur buying and help push the market up again, he said.

 

CBOT corn futures have been declining for the last five days, with the December contract ending Tuesday (Oct 19) US$0.11 1/4, or 2%, lower at US$5.46 a bushel. The CBOT December wheat futures contract ended US$0.18 1/2, or 2.7%, lower Tuesday (Oct 19) at US$6.71 1/2 a bushel.

 

South Korea's Major Feedmill Group is seeking two cargoes totalling 110,000 tonnes of corn for delivery by early February. Buyers in Japan are locking-in supplies of corn to take advantage of the latest correction in prices.

 

Fresh demand is coming in at a time when suppliers in Ukraine are cancelling orders to export wheat because of the government curbs.

 

Traders said that as the flow of wheat from Ukraine to Asian destinations has reduced to a trickle, there is going to be a shift of demand pressure to other origins.

 

Sales of Australian and Central European wheat to countries such as Bangladesh are on the rise.

 

"Our suppliers are switching over the origin of cargoes to Europe and the US," said a Seoul-based trader.