December 11, 2006

 

Asia Corn Outlook: Premiums seen up; US crop demand

 

 

Premiums of corn and wheat delivered to Asia may rise in the week ahead, as U.S. wheat and corn demand remains robust.

 

Higher corn premiums may continue to deter Asian buyers from aggressively importing corn this week.

 

Over the past week, two corn buying groups rejected all bids for their corn purchase tender, because of high prices.

 

The Korea Corn Processing Industry Association rejected bids for a corn purchase tender, while Taiwan's Major Feed Industries Group also rejected a tender to buy up to 60,000 metric tonnes of corn.

 

However, the Korea Feed Association bought 220,000 tonnes of U.S. corn last week from trading houses Cargill and Louis Dreyfus.

 

Asian corn buyers expect corn prices to remain high in 2007, much as in 2006, as global demand from the ethanol sector and China's rising domestic use of corn is likely to shrink any surplus available for corn exports.

 

Analysts and industry officials said in the near term, there's not much chance of corn prices becoming subdued.

 

"Over the first five to six months of 2007, corn prices will keep rising. The fundamentals for corn are unlikely to change dramatically," said A. Ali Basry, the Indonesian representative of the U.S. Grains Council.

 

"The general feeling going into next year is bullish for corn prices," added Vijay Iyengar, managing director of Singapore-based trading firm Agrocorp International Pte Ltd.

 

In wheat, over the last week, Japan's Ministry of Agriculture, Forestry and Fisheries bought higher-than-usual quantity of wheat in its weekly tender, buying 206,000 tonnes from the U.S., Canada and Australia.

 

South Korean flour mills - Daehan, Daesun and Samhwa - bought 23,600 tonnes of U.S. No.1 wheat in a tender last week.

 

In other news, domestic corn and wheat prices in China will largely remain at current levels, as ample supplies will satisfy stronger demand, analysts said.

 

Around 2 million tonnes of wheat were sold at state-held auctions held over the past two weeks, which have helped market prices stabilize around RMB1,460-RMB1,600.

 

Wheat prices aren't likely to plunge or surge in the near term, as the government is expected to sell more stocks via regular auctions, analysts said.

 

China sold 635,671 tonnes of wheat at auctions held earlier Thursday.

 

Despite rising demand, corn prices aren't expected to rise by a large margin in the short term, as supplies are also growing in China, local traders said.