December 12, 2005

 

Asia Corn Outlook: Premiums to rise on barge tariffs

 

 

Premiums of wheat and corn delivered to Asia may rise in the week ahead, as frigid weather in the U.S. is playing havoc with the barge transportation system.

 

With ice on some key rivers impeding barge traffic, U.S. analysts say barge freight tariffs have risen to more than five times historical par value in some areas, leading U.S. traders to increase premiums for grains and oilseeds destined for export.

 

The U.S. Coast Guard and U.S. Army Corps of Engineers have issued safety advisories to mariners regarding low water levels and icing on the Mississippi and Illinois rivers.

 

Asian traders said shipments of grains and corn from the U.S. Gulf have slowed due to the weather, while shipments from the Pacific Northwest have increased since last week.

 

Spot ocean freight rates from both U.S. regions to Asian countries, such as Japan and South Korea, have also stabilized since last week, with traders not expecting any further declines.

 

However, on the U.S. futures market, a continued weak tonnee is forecast for both wheat and corn futures. In the week to Wednesday, U.S wheat futures ended lower most days, while corn futures had a mixed run.

 

In Asia, a Korean corn buyer said higher premiums of corn over the last week has made Korean traders cautious.

 

"Most Korean traders are anyway eyeing corn for April delivery. So they are in no hurry to buy right away," said the buyer.

 

In major deals over the week to Wednesday, Japan's Ministry of Agriculture bought 125,000 metric tonnes of wheat from the U.S., Canada and Australia in a weekly tender.

 

Taiwan Flour Mills Association bought 83,160 tonnes U.S. No.1 wheat from Toepfer and Columbia Grains for January-February shipment.

 

The price, cost and freight included, varied from $138.19-$194.5 per tonne for various grades of wheat.

 

South Korean flour mills also bought 22,000 tonnes of U.S. No.1 wheat from trading house Mitsui.

 

Meanwhile, a large team of Chinese wheat buyers is currently visiting the U.S., meeting with U.S. government officials, grains companies and traders.

 

According to the U.S Wheat Associates, the focus of the Chinese delegation is not to place immediate orders for U.S. wheat, but rather to focus on the "long-term future."

 

"What is especially heartening is the combination of private millers and government officials on this team, all very interested in learning more about U.S. wheat choices and the reliability of our market system," said U.S. Wheat Associates' regional vice president Matt Weimar.

 

Separately, the U.S. Department of Agriculture said India should resume wheat imports soon.

 

"India is expected to return to importing significant quantities of wheat for the first time in six years as stocks have fallen to low levels," said USDA analyst Levin Flake in a recent World Situation and Outlook report.

 

The U.S. Wheat Associates added that India may import before its current wheat crop is harvested in April/May.