November 19, 2012


Thailand eyes feed wheat as corn supplies decline


As the nation's corn supplies decline, Thai millers are likely to be in the market for 60,000 tonnes of feed wheat for December-January shipment, while Malaysian importers are looking to lock in corn cargoes for early next year.


Indian wheat is likely to win the business from Thailand as the South Asian nation has been making the most competitive offers, traders said.


"I think they will seek at least 60,000 tonnes for December or January arrival after which there will be more demand," said a trader with a Singapore-based trading company.


"Going by today's price, Thailand is likely to take Indian wheat and the next best origin is Brazil, but there are some quality issues with Brazilian wheat."


India's state-run trading firms have been steadily floating wheat export tenders from overflowing government warehouses.


India's MMTC Ltd issued a global tender on Wednesday (Nov 14) to export 100,000 tonnes of wheat for shipments in January, while PEC last week floated a tender to sell 125,000 tonnes of milling wheat for shipment from December 10-January 15.


Still, prices of Indian wheat offered for exports have climbed in recent weeks, which could result in losses for several traders who have committed to sales at lower prices.


"There are many traders who are short on Indian wheat," said another Singapore-based trader.


"People have sold Indian feed wheat into South Korea at around US$327 and the last Indian wheat tender was about US$318 free on board, which means there will be a loss after you take into account the freight."


The cost of shipping wheat from Indian ports to South Korea is around US$15-18 a tonne. Last week, MMTC received the highest bid at US$318.67 per tonne from Louis Dreyfus in its export tender, compared with US$310.80 a tonne quoted on October 25.


The market expects global wheat prices to be supported by dryness hurting the hard red winter wheat crop in the US. US winter wheat was 36% good to excellent as of November 9, down from 39% a week earlier, the USDA said. A year ago, the crop was rated 50% good to excellent.


Dryness remains a concern across the US farm belt following the worst drought in more than half a century, and little rain is expected in the western portion of the US Plains hard red winter wheat region for the next 15 days, according to MDA EarthSat Weather. Grain buyers are shifting to the US for corn as South American supply tightens.


Malaysia is likely to be in the market for around 120,000 tonnes for January shipment and millers are likely to be forced to pay higher prices for US corn, traders said.


US corn prices could rise to a record US$9 a bushel in the next six months as global grain markets continue to feel the effects of severe weather disruption to harvests from the US to Australia, Chicago-based consultancy AgResource Co said.


South Korea's largest feed maker Nonghyup Feed Inc. has purchased 139,000 tonnes of corn to be sourced from South America in a snap tender.


Some 70,000 tonnes was purchased at US$336.90 a tonne c&f from Dreyfus for arrival March 5, 2013. Another 69,000 tonnes was bought at US$334.99 a tonne c&f from Cargill for arrival by February 25, 2013, traders said.


This compared with US corn being offered this week at US$355-360 a tonne for shipment in the first quarter of 2013.


"We are not getting any offers for South American corn for January-March shipment as supplies have dried up," said the first Singapore trader. "South Korea has purchased South American corn but this should be the last one."