Corn struggles to find buyers as global prices slide
11 Apr, 2013
MUMBAI/SINGAPORE: Aggressive corn exports look set to hit a wall as a slide of more than 13 per cent in global prices since mid-March has made shipments from the South Asian nation uncompetitive, prompting buyers to seek cheaper cargoes from South America.
A drop in shipments from Asia’s top exporter would give South American suppliers the chance to grab a larger share of the Asian market, and support Argentinean prices, which have dropped after a selloff in the benchmark Chicago futures.
As global supplies rise, India could see sales fall as much as a quarter to between 3.0 million and 3.5 million tonnes in the year to September, from 4.0 million to 4.5 million tonnes shipped a year ago, traders and analysts estimated.
Brazil and Argentina, the world’s second and third largest corn exporters after the United States, are forecast to produce bumper crops this year while US farmers are gearing up to boost planting.
Buyers in Indonesia, Vietnam and Malaysia, the top destinations for corn, are shying away from signing new contracts, hoping to negotiate better deals when shipments from Argentina peak in May and June, traders said.
“Fresh deals are not being signed because of lower global prices and pressure from arrivals in Argentina,” said Sanjeev Garg, chief executive of Commcorp International LLP, a Delhi-based trading house.
“Exporters are meeting their contractual obligations that were signed earlier and this is likely to continue for another 15 to 20 days.”
Chicago Board of Trade corn dropped to its lowest in nine months last week after a US government report showed larger-than-expected supplies.
The US Department of Agriculture surprised the market in its quarterly stocks report on March 28 with higher old-crop supplies, easing a near-term supply crunch ahead of a potentially record crop to be planted in the next few weeks.
LATAM VS INDIAN CORN
As a result, South American corn being offered in Asia has dropped to $290 a tonne, including cost and freight (C&F), from $325 a tonne quoted before the USDA report at the end of March.
Indian corn is quoted around $280 a tonne in Southeast Asia for June shipment.
“Corn had a huge cost advantage to South America in March, when the spread between the two origins was $40 a tonne but that has now narrowed to just $10,” said one Singapore-based trader who sells feed grain in Southeast Asia.
“Importers are typically attracted to Indian corn when it is $15 to $20 cheaper than Argentine corn.”
Corn export deals have slowed this week, with traders reporting the sale of just one cargo of around 15,000 tonnes to Vietnam at $280 a tonne, C&F, for May shipment.
“There is not much Indian corn being sold. This deal with Vietnam was driven by the buyer’s need to cover some immediate demand,” another Singapore trader said.
Exporters have been aggressively selling corn this year, with 450,000 tonnes contracted for shipment to Indonesia in April and May, some 100,000 tonnes to Vietnam and 60,000 tonnes to Malaysia.
Indonesian feed millers paid between $280 and $295 a tonne, C&F, for new-crop Indian corn before the slide in global prices.
Although corn prices have eased slightly, strong demand from the domestic poultry industry and the government’s minimum support prices underpins the market, traders said.
“Prices are already close to the minimum support level,” said Prerana Desai, vice-president of research at Kotak Commodities. “We don’t expect a big decline in corn prices as local maize consumption is rising because of higher demand from the poultry industry.”
The farm ministry has estimated 2012/13 corn output at 21.06 million tonnes, down about 3 per cent from 21.76 million tonnes the year earlier. Traders said a drop in the summer sown crop, due to a delayed monsoon, caused a decline in total output, but a good winter harvest made up for that slightly. Global Agriculture. Source The Times of India
Published: Zarai Media Team