Taiwan and South Korean grain and oilseed importers will be quiet this week as record dry bulk freight rates and reduced animal herds slow buying interest. "I doubt there will be any moves this week to hold buy tenders with freight as high as it is," said a merchant at a major international trading house.
The Baltic Exchange's dry freight index, which measures the strength of suborn trade for dry commodities, hit a record on Friday on strong demand for raw materials and port congestion in the Pacific.
The London-based exchange's chief price index hit 7,011 points, surpassing a record hit last week. Soaring feed prices and slack demand in the Taiwan market has led swine producers to cut the size of their herds, which in turn has lifted pork prices to three-year peaks, say industry officials.
As a result, Taiwanese imports of corn one of the main ingredients used in animal feed dipped 15 percent in the first five months of this year to 1.79 million tonnes, customs data showed.
"But despite high prices and lower feed demand, at the end of the day, these raw materials must be bought, which is causing a scramble for container shipments," said the trader.
Shipping raw commodities via containers has grown in popularity over recent years in Taiwan as dry freight prices have risen. The containers, which would otherwise return empty to Asia from the United States, are instead loaded with corn or wheat and offer a cheaper alternative for buyers seeking to cut costs.
Traders said state-run Taiwan Sugar Corp, which has traditionally relied on open tenders to purchase corn and soyabeans, has recently secured shipments of US grains via containers. Details of the cargoes were unavailable.
South Korean importers are also expected to tread cautiously this week as they wait for a fall in persistently high freight rates. "Freight rates near $100 per tonne are too much. We will wait for a dip," said an official at Major Federal Group. Spot voyage fixtures for modern Panama rates for the benchmark US Gulf to Asia route are being quoted at $93-94 per tonne, while freight rates for the South American to Asia route are hitting $100.
The rates have risen more than 70 percent so far this year. Some South Koreans are eyeing cheaper Chinese corn as a feed maker bought a cargo of the Chinese grain last week.
Nonghyup Feed Inc bought 45,000 tonnes of Chinese corn from a Chinese trading house, said traders. Dalian Hoaxing Enterprises Co will provide the corn at $223.9 per tonne, including cost and freight, by October 5.
"But a large amount of Chinese corn is not available in the market. South Korean buyers should not count on the grain," said a trader at an international grain house. South Korean market will be closed on Wednesday due to a national holiday.
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