Grain buyers in Japan and South Korea will likely take a cautious stance this week as soaring Chicago futures and a strong dollar make imports more costly, while Taiwanese importers plan corn and soyabean tenders.
Traders in Seoul said on Monday that Korean wheat importers are expected to stay on the sidelines this week, while corn buying is likely to be slow with many feed makers having already covered requirements up to February. "We cannot accept this high level of wheat prices," said an official at a Korean flour miller.
Wheat futures at the Chicago Board of Trade rallied on Friday as Egypt's buying of 300,000 tonnes wheat triggered speculative buying amid ongoing jitters about tight global supplies. Benchmark December wheat climbed 10 cents or 1.9 percent to settle at $5.25-1/2 per bushel on Friday. It marked a 10-year high of $5.51 on Thursday and rose 61-1/2 cents or 13 percent for the week.
Chasing a rally in wheat, CBOT corn futures hit fresh two-year highs on Friday as investment funds dived into the market amid shrinking stocks of feed grains and brisk export sales. "Many feed makers seem to be more relaxed on higher corn prices because they have already secured corn for 2007 arrivals, than usual," a Seoul-based trader said.
"But they can move again this week, anticipating further rises in grain prices." Last week, South Korean buyers bought up to 480,000 tonnes of corn for January and February arrivals. "Nonghyup Feed, which needs to cover January and February positions, could issue a tender to buy corn this week," the trader said.
In Taiwan, the Kaohsiung-division of the Breakfast Soyabean Procurement Association will hold a tender on Tuesday to buy up to 60,000 tonnes of either US or Brazilian soyabeans for shipment in November or December, traders said.
The state-run Taiwan Sugar Corp is also expected to re-tender for a 35,000-tonne shipment of US corn this week, although no details of timing have yet been announced, traders said. Japanese feed makers will likely seek US corn for January-March shipment this week, but a rally in the Chicago market and firm premium offers are expected to deter them from buying aggressively, traders said.
One trader estimated Japanese feed makers covered about a quarter of their total corn requirements for the first quarter, or around 750,000 tonnes, by the end of last week.
"Buyers have been hit by the triple blow of higher Chicago prices, firmer premiums and a weaker yen," the trader said, adding that things could get worse as soaring wheat prices could encourage feed makers to shift from wheat to other grains such as corn, leading to further gains in corn prices.
US corn premiums for January-March were offered on Monday to Japanese buyers at around $2.25 a bushel over CBOT's March contract on a cost and freight basis, up from around $2.05 for fourth-quarter premiums. The yen hovered at 119.70 yen against the dollar on Monday, near a 10-month low, making US grain more expensive to Japanese buyers.
In the soyabean market, Japanese buyers will seek US soya for December shipment this week, after covering about half their requirements for the month by the end of last week, traders said. Monthly soyabean requirements from Japanese oilseed crushers were about 243,000 tonnes on average this year, down more than 4 percent from last year, as demand shifted to rapeseed.
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