Asia corn buyers in desperate search for supply Sunday, December 03, 2006
SINGAPORE: A scramble by Asian corn buyers to secure supplies is likely to intensify in coming months, as dwindling stocks and sales restrictions by leading exporters look set to lift prices beyond current 10-year highs.
Limited exports by China and Argentina and the possibility of a ban on Indian corn exports are increasingly closing all options for Asian millers, who depend on imports for the bulk of their needs to make feed for animals.
Adding to their woes are dwindling supplies of feed wheat used as a substitute for corn in animal feed making as leading wheat producers are hit by erratic weather.
“There will be a big scramble for corn until March,” Amit Sachdev, representative for India of the US Grains Council, told Reuters. “Also, there are not many alternatives to corn which feed millers can buy at competitive prices.”
Traders said with supplies expected to remain tight until March, when the new Argentine crop is harvested, Asia buyers were making desperate inquires for corn even from non-traditional suppliers.
“People are also looking to see is they can pick up some corn from Myanmar,” said one trader.
Price outlook: US corn prices have surged more than 50 percent since mid-September and on Thursday hit a new 10-year high. December corn closed 6-¾ cents higher at $3.77 per bushel, after climbing as high as $3.78.
“While the price gains witnessed over the course of the year are impressive, we believe the rally in corn prices is not over and continue to view prices with an upside bias,” Barclays Capital said in a research report.
On the demand side, the upward pressure on prices is expected to come from surging US demand for ethanol production, diverting away corn from exports. In addition, China’s domestic consumption was surging, the report said. China, on which most Asian buyers depend for small cargoes, sold nearly 4 million tonnes of corn for shipment between November and February.
But fears are mounting that China could default on some of its recent corn sales to South Korea because of surging domestic prices, which rose 10 percent in November. Asian buyers said this was sending a signal to the market that Chinese availability in 2007 was unlikely to improve. “When China has started talking about imports, there is no point talking about how much they would be able to export next year,” said one trader.
China’s Xiwang Sugar Holdings Ltd, one of the country’s top corn sweetener producers, said last week it would apply for 2007 corn import quotas totalling 600,000 tonnes, against this year’s quota of 100,000 tonnes.
Southeast Asia, India: In recent years leading Southeast Asian corn importers have been getting the bulk of their needs from Argentina.
But with Argentina suspending export permits last month on surging domestic demand, some Southeast Asian buyers are picking up cargoes from Thailand.
Traders said as much as 100,000 tonnes of Thai corn had been committed for exports to Malaysia, Vietnam and Indonesia for December shipments. Most deals were done between $185 and $190 a tonne, free-on-board. “But now Thai prices have also started climbing and they also want to keep their corn for their own poultry sector,” said one Singapore-based trader.
India’s decision last month to export corn for the first time in many years had given the market some breathing space, but with local prices also surging, a ban on exports looks imminent.
Traders said India ran the risk of committing more than it could supply as the domestic crop had been estimated to be around 12.4 million tonnes, compared with last year’s 12.8 million. Annual domestic consumption is about 14 million tonnes. reuters
