October 22, 2003
Japan, Taiwan's Corn & Soy Market Fall Due To High Freight Costs
Record high shipping costs will continue to depress the appetite for corn and soybeans in Japan and Taiwan this week as buyers delay year-end shipments until prices come down, traders said on Monday.
Panamax rates for the benchmark U.S. Gulf to Japan route were around historic highs of about $52-$53 a ton, said a trader with a major trading house.
Last week, the Japanese domestic corn market was very quiet, said the trader, blaming high freight rates. Traders said Panamax rates had been pushed up by soaring demand from China for iron ore and steam coal, and were unlikely to fall in the near future.
"We may see some last minute deals as importers cannot delay any further the remaining deals for November and December shipment," he said.
The price pressures are also faced by Taiwanese buying groups, while there is no corn or soybean tenders expected this week.
"Most Taiwanese buyers are looking at December shipments which gives them around two weeks to wait and see if the freight prices will come down," said a Taipei based trader. "They don't have the pressure to buy immediately, but they can't hold out forever," said the trader.
Great Wall Feed Group, one of Taiwan's two main corn-buying associations, will likely seek another one or two 56,000 ton Panamax cargoes of corn, a group official said.
Japanese importers need to cover about 10-20% of their corn needs, which equates to about 4million tons in the fourth quarter, and are expected to set their feed product prices for the first quarter in December.
In the oilseed market, traders said there had been little progress in Japan's soybean buying for December shipment due to higher Chicago Board of Trade (CBOT) soybean futures and the shipping costs.
In Alliance/CBOT/Eurex (A/C/E) trading on Monday, the most active CBOT November contract was up 7 cents per bushel at $7.37 on volume of 712 lots at 0335 GMT. CBOT January rose 6 cents to $7.36 with 469 lots traded.
CBOT December soymeal rose $2.20 per ton to $221.70. December soyoil was up 0.24 cent per lb to 26.70 cents.
TAIWAN DEMAND DOWN
Competition from imported meat since Taiwan joined the World Trade Organisation has hit feed makers who have cut their output by 7% to 7 million tons this year, according to a senior official at the Taiwan Feed Industry Association.
An outbreak of the deadly SARS virus early in the year also reduced sales of meat, said the official who admitted that only 30 to 35 of the group's 52 members are producing.
However, if freight prices come down and demand picks up then feed operations at these firms could return, said the official.
In addition, increased competition in the meat sector has also affected demand for soymeal, which is expected to drop by around 5% this year to 2.27 million tons, said a Taipei-based official with the American Soybean Association.
"Soybean buyers are very nervous as replacing soy in feed is difficult and the prices don't look like they'll come down in the near term," said the executive who requested anonymity.