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Black Sea drought raises Asia corn demand

John Walter 09/08/2010 @ 8:41am

Asia's corn demand will likely rise over the next few months as buyers in Southeast Asia, facing a shortfall in feed wheat, are locking in purchases of the alternative grain, providing strong support to prices.

India has already made its first export sales of new-crop corn to buyers in Southeast Asia for shipment in November and December.

Corn from both Argentina and the U.S. is in strong demand in North Asian countries, such as Japan and South Korea.

"Bulk shipments are taking place from South America and the U.S., while buyers who haven't been able to cover their immediate requirements are sourcing cargoes from India," said a Singapore-based executive at a global trading company.

Corn prices may rise to $5.25/bushel this year due to increased demand for animal feed, said Dominic Schnider, head of commodity research at UBS Wealth Management.

The Chicago Board of Trade September corn futures contract ended 1.75 cents, or 0.4%, higher Tuesday at $4.5150 a bushel, up around a third from a trough hit in late June.

Corn--not wheat--is the market leader as far as setting price direction is concerned, said Genichiro Higaki, head of proprietary fund management at Sumitomo Corp. in Japan.

As Black Sea countries including Ukraine and Russia have stopped supplying feed wheat, importers are looking for wheat shipments from central and Europe, and substituting part of their animal feed requirements with corn.

Traders Wednesday said more than 20,000 metric tons of corn from the upcoming Indian harvest has been sold to Indonesia, Vietnam and Malaysia at $233-$247/ton, cost and freight. India's corn harvest mostly takes place in October.

"There is strong buying interest for Indian corn, as it is much cheaper than South American corn" and it takes less time to deliver, said one of the traders involved in such deals.

More deals are being negotiated and sales will rise further in the next few days, he said.

Argentinian corn for bulk shipment in December has been sold to South Korea recently around $270/ton. India is offering bulk cargoes to Malaysia and Vietnam at $260-$262/ton.

Indian corn in container shipments has been sold at $235-$236/ton to Malaysia, $233-$234/ton to Indonesia and $238-$247/ton to Vietnam. Sales to Hai Phong port have been made around $347/ton and to Ho Chi Minh City between $238-$243/ton.

More than 7.1 million hectares of area has been planted with corn this year in India, compared with a normal acreage of around 6.86 million hectares.

India's corn exports had been badly hit after the April harvest, when local prices rose above rates at which traders had done deals with overseas buyers and several contracts were canceled.

By Sameer Mohindru, Dow Jones Newswires; +(65) 9455-2449; sameer.mohindru@dowjones.com

(END) Dow Jones Newswires

September 08, 2010 04:49 ET (08:49 GMT)

Copyright (c) 2010 Dow Jones & Company, Inc.

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