Asia’s corn buyers look for bargains as freight keeps sellers on their toes

Firming freight values and bargain-hungry buyers are driving a wedge between bid and offer prices to keep a lid on trading activity in the Asian corn market, sources said Tuesday.

“The first quarter of 2018 has been doing quite well in terms of spot demand,” one trader said, but that much of the steam had passed out of the market in the last few days after a raft of trading and tender buying.

“We’re looking at a buy level for feed grade of around $186/mt, with sellers at $197-198/mt on a CNF basis. The US has the cargoes to move… but freight has got a bit firmer and sellers are unwilling to discount,” the trader said.

On the other side, buyers have also driven a hard bargain evidenced by a tender from South Korea's KOCOPIA going unfilled last week as offers fell short of the buyer's expectations. 

Agricensus assessed the CIF Korea corn market at $191/mt Monday for deliveries 21 to 42 days ahead.

Freight from the Pacific Northwest into Japan has firmed recently, rising from around $19/mt at the start of September to stand at around $25/mt for Panamax vessels as of December 16, according to freight values coordinated and published by US Wheat Associates, and corroborated by freight sources.

“The Pacific Northwest has been competitive, particularly into Japan and Cargill has been moving a lot that way. Internally, there’s been demand towards the PNW; they have the elevation at PNW to manage the volume and the opportunities are all that direction,” a second trading source said, with Asia a potentially reinvigorated frontier for US corn exporters.

China recently announced that it would be bolstering ethanol mandates and cutting back on corn plantings in order to clear some of the substantial backlog in corn stocks that the country is carrying, but it has raised the prospect of China’s demand picking up and the US being well-placed to meet it.

That would be a welcome development for US farmers, who are currently facing a substantial corn crop and fierce competition for demand from Brazil and Argentina, while also facing increased competition for area from soybean.

“China’s already taken one million mt, could the new normal be 2 million? We’re on the cusp,” the second source said.