October 25, 2012
Asian corn prices may come under pressure on sluggish demand
For the next few days, Asian corn prices are likely to come under pressure due to sluggish demand, favourable prospects for plantings in South America and harvest pressure in the US.
"Even though overall global and US production are lower this year on-going arrivals are putting pressure on prices," said a Singapore-based executive with a global commodity trading company.
Supply from Brazil has to a large extent offset lower supply from the US and now the harvest has also started in Ukraine, a Tokyo-based broker said.
Brazil had a record corn crop this year and exports are forecast to almost double to 16.5 million tonnes in the year that started July 1, the International Grains Council forecast.
Corn has even traded below US$7.50/bushel on the Chicago Board of Trade since hitting a record of US$8.4375/bushel on August 10. At 1005 GMT, the near-month December contract was trading around US$7.58/bushel.
Many feed millers in South Korea have already covered their requirements until January-February and are not in a hurry to make additional purchases, an importer in Seoul said.
US corn prices continue to struggle due to weak demand, said Karl Setzer, an Iowa-based analyst with MaxYield Cooperative.
"Mexico has switched a large corn purchase this week from optional origin to non-US origin. The supply is likely to be made from South America and this is not the only business US has lost," he said.
Traders say the US is now also aggressively importing corn, adding to the domestic supply. Lower corn demand to produce ethanol is also weighing on prices. US corn output in the marketing year that started September 1 is forecast to fall 13% to 272 million tonnes, according to government estimates, but traders point out that a smaller crop has also resulted in lower demand for use in ethanol production.
US ethanol output this year is likely to average around 855,000 barrels a day, down from 907,000 barrels a day in 2011, Eisentraut said. The US is world's largest ethanol producer, accounting for nearly 60% of global output.
Separately, Taiwan Sugar Corp. is seeking 23,000 tonnes of US corn and 12,000 tonnes of US soy in a tender that closes Thursday (Oct.18). Shipment is to be made between November 14 and December 12 from the Gulf of Mexico, or December 2-16 from the Pacific Northwest.
