Asian grain importers are cutting back on purchases, hoping that prices already near multi-year lows will drop even further on expectations of record global supply. Mills usually book cargoes three to four months ahead, but most Asian importers are locking in supplies just two months in advance, traders and industry officials said.
That could hurt key exporters including the United States, Brazil, India and Ukraine, and will pile further pressure on prices for crops such as corn, wheat, soybeans and rice. It also leaves consumers vulnerable to any supply disruptions that might spring up, especially with El Nino forecast this year. The weather pattern typically sparks droughts across much of Asia and excessive rains in South America.
"Buyers are looking at the global supply situation, reading reports on production prospects which point to overwhelming supplies," said a veteran grains trader in Singapore. He declined to be identified as he was not authorised to speak with media. "We have been here long enough to realise the market is bearish (on prices) now but you have no idea what is going to happen in three to four weeks. It could be too wet, too dry or too cold."
Importers are taking just 60-70 percent of their requirements instead of the 110 percent they would usually buy in a year with a grim supply outlook, traders said. Wheat millers in countries such as Indonesia, Asia's top importer of the grain, have put off buying after a bout of purchases from the Black Sea in early June. They had been planning to take large volumes from the region.
And feed millers in Japan, the world's top corn importer, have just finished tying up supplies for August with half of September still open. "Such dominant weakness in grain futures has discouraged Japanese companies from buying forward shipments," said Nobuyuki Chino, president of Tokyo-based Continental Rice Corp. "If they buy now and Chicago futures fall again, they will get stuck with expensive shipments." Near-perfect growing weather across much of the US grain belt has buoyed hopes of record production in the world's biggest wheat and corn exporter.