Japanese and South Korean corn buyers are likely to keep a low profile this week in hopes that their importing costs will fall further, industry sources said. Demand for Chinese feed wheat, an alternative to feed corn, from South Korean grain importers seems steady, they said.
"Chinese feed wheat prices are a bit attractive. We will seek one or two cargoes of feed wheat this week," said an official at the Korea Feed Association. South Korean traders said feed makers were likely to look for July and August shipments this week. Last week they jointly bought a total of 107,000 tonnes at around $210 per tonne, including cost and freight, for arrival in June and July.
South Korean corn buyers, however, are expected to stay on the sidelines as higher Chicago futures put pressure on active purchases. "We will move when corn import prices fall to $210 per tonne, including cost and freight, from the current $230," said an official at a major feed maker.
Corn prices on the Chicago Board of Trade hit 10-year highs earlier this month amid surging demand from the ethanol industry. But the lack of spot export demand has caused freight rates for hauling grain from North America to Asia to slide.
Also, some buyers are hoping that US government reports in February will contain bearish estimates of the 2007/08 corn crop and cause futures prices to drop. The US Agriculture Department (USDA) will issue its first projections of 2007 crop output and usage on February 9. US farmers are expected to give a much larger portion of their land to corn this year because of the rally in corn prices.
WAIT-AND-SEE In Japan, the prospect of a further fall in import costs encouraged buyers to wait a little longer. "They don't want to lose money now that FOB (free on board) premiums are on the decline," said a corn trader. Japanese feed makers are believed to have contracted about a half to two-thirds of their needs for April to June, he said. Japanese companies usually buy about 3.0 million to 3.1 million tonnes of feed corn each quarter.
As for soybeans, some edible oil makers have started to discuss terms for April cargoes, but many are still covering their needs for March, traders said. US soybean premiums for March shipment were estimated at $2.20-$2.30 a bushel over March contract on the Chicago Board of Trade, on a cost-and-freight basis, a Tokyo-based trader said.
The premiums for new-crop soybeans from Brazil are slightly higher than that, he added. The more Japanese oil crushers discuss April shipments in coming weeks, the more demand is seen for Brazilian shipments, totalling around 80 to 90 percent of April cargoes, the trader said. The rest are from the United States.
In Taiwan, traders and buying group officials said grain importers would tender to buy US corn and soybeans this week and were also likely to seek a shipment of US wheat.
The state-run Taiwan Sugar Corp will open a tender on Thursday to buy 23,000 tonnes of US corn and 12,000 tonnes of US soybeans, traders have said. A USDA report showed Taiwan's soybean imports are set to decrease. Falling hog production and unusually high carry-over stocks from 2005/06 are seen pulling down Taiwan's imports in the next two years by 10 percent to around 2.25 million tonnes each year, according to the USDA report released earlier this month.
The Taiwan Flour Mills Association is also likely to seek between 70,000-80,000 tonnes of US wheat in two shipments via a tender later this week, a group official said. "The volumes have been handed to the association chief and a decision is likely soon on holding a tender sometime this week," an official said on condition of anonymity.
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