With record-breaking freight rates, grain buyers in Asia are expected to tread cautiously this week, traders said on Monday. Shipping costs have recently hit a record on strong Chinese and Indian demand for raw materials and crippling port congestion at Australian iron ore and coal export terminals.
Japanese grain and oilseed traders, just back from a four-day holiday weekend, said they were trying to assess the shipping market, before they resume buying. Soyabean buyers in Japan are estimated to have purchased some 50 percent of their needs for June shipments. Japanese traders said activity was slow last week as businesses were closed on Monday, Thursday and Friday, for the Golden Week holiday.
One soyabean trader with a Japanese trading house said it looked like they would have to wait for China to return from a week-long holiday on Tuesday before market activity picks up.
"China is at the centre of the freight market and without China we can't even get any quotes," he said. The Japanese trader said freight rates for modern Panama ships sailing for Asia from the US Gulf Coast could have risen to as high as $80 per tonne, although it was difficult to pin down exact rates with very few ships available.
Japanese buyers typically buy soyabeans from Brazil around this time of the year, drawn by the quality of the oilseed, but high freight rates were dampening their appetite this year.
"The longer distance from Brazil means even higher freight rates, and this makes the oilseed from Brazil even less competitive," he said. Japanese corn buyers are believed to have covered at least 25 percent of their requirements for July-September shipments.
One corn trader said it was not clear if Japanese buyers had purchased any more corn from China after earlier buying an estimated 100,000 tonnes. Beijing has given an initial quota of more than 1 million tonnes for corn exports after March.
Traders said they expected some activity this week as very little business was done last week due to the holiday, but they added that their attention would be focused on freight rates.
Surging crop prices are deepening worries of South Korean buyers, already hit by rising freight rates. "Freight cost and grain prices are both our concerns. It is not a good time to buy," said an official at a member company of the Korea Feed Association. Corn futures on the Chicago Board of Trade surged on Monday due to continued concerns about slowing seedlings in the US Corn Belt because of wet weather.
New-crop December corn in after-hours electronic trade on the CBOT was up 9-1/4 cents at $3.99-3/4 per bushel, after hitting $4.01, the highest since April 9. "Investors are taking their positions before the US Department of Agriculture announcement today," said a trader in Seoul.
The USDA will release a crop planting estimate later on Monday and traders were forecasting that up to half or less of planting had been completed in the United States, behind the roughly 60 percent five-year average by this time of the year. Rainy weather in parts of the US western Midwest, a key corn-growing area, has led to slow seedlings of the 2007 corn crop.