November 13, 2003

 

 

Asian Buyers Caught Between Buying US or China Corn

 

Asian grain suppliers are offering U.S. corn for January and February shipments, but buyers are wary of striking deals as they hope China might offer cargoes for export, regional traders said on Thursday.

 

Considerable uncertainty surrounds China's corn export policy for 2004 as the world's most populous nation struggles to rein in rising food prices amid falling grain stocks.

 

While most grain traders are of the view that China won't halt exports, the volumes in 2004 are going to be nowhere near record exports of 13 million tonnes or more seen this year.

 

"Entering into a forward U.S. corn contract now is like commiting suicide," said one Singapore-based trader. "If you buy U.S. corn now and suddenly see China back in the market in the new year, you will have nowhere to go."

 

Chinese corn offers have been limited but some of the latest offers were above $140 a tonne FOB. U.S. corn was offered around $160 a tonne C&F Southeast Asia. But a recent easing of Chinese domestic prices is providing some relief to the grains trade.

 

"We know that we have to position ourselves for more U.S. corn in early 2004 but it's very difficult to decide the amount," said another Singapore trader. "Buyers are unable to decide which one is the right step."

 

On Wednesday, Chicago Board of Trade corn futures rallied after the U.S. Department of Agriculture estimated this year's corn production at 10.278 billion bushels. While it would still be a record-large crop, the estimate was 67 million bushels below an average of analysts' estimates.

 

CBOT corn futures ended 7-A3/4ents to A3/4 cent higher, with December <CZ3> up 7-A3/4 at $2.40-1/4.

 

KOREAN, MALAYSIAN MOVES

 

South Korea and Malaysia are the two leading buyers of Chinese corn. Traders said any move by the two Asian nations to shift to U.S. supplies should send a strong signal to other buyers.

 

"I would think South Korean and Malaysian buyers are involved in serious consultations to find out what's going to happen," said a trader. "With the volumes they buy, they have to take their decisions fast. They can't defer purchases forever."

 

South Korea bought more than 4.6 million tonnes of corn for feed between January and September. Over 96 percent of that was from China. Malaysia buys about 90 percent of its annual requirements of the grain of 2.4 million tonnes also from China.

 

Commenting on recent shipment problems of nearby Chinese corn contracts, regional traders said more cancellations were unlikely as Chinese domestic prices had eased to some extent.

 

"But some delays are still there. Both high freight rates and availability problems are contributing to that," said one Kuala Lumpur-based trader.