20-06-2016

Asian millers face tight feed grain supply as rain disrupts Argentina exports

grain

Asian millers that churn outanimal feed are expected to face a squeeze in supplies of keyingredients corn and soymeal in coming weeks as heavy rainsdisrupt shipments from major exporter Argentina.

Cargoes from the South American nation have been facingdelays for the past few weeks due to strong rainfall, butmillers have been able to operate using exports that werealready en route and inventory, two trade sources told Reuters.

But as those stocks dwindle, Asian feed makers are set tofeel the pinch from tightening supply, likely boosting benchmarkprices already driven up by unfavourable crop conditions inSouth America.

Chicago soymeal futures have surged more than 50percent since early April, while corn has jumped by abouta quarter.

“I think the real tightness in supplies will come from Julyonwards,” said a trading manager with an international tradingcompany in Singapore. He declined to be identified as he was notauthorised to speak with media.

“The situation seems to be improving slightly in recent daysbut even if a boat leaves today, it will take 45 days to get toSoutheast Asia.”

Vietnam and South Korea are likely to be worst-hit in theregion by tightness in corn supplies as they depend heavily onSouth American feed materials, traders said.

South Korea is the world’s third-largest importer of corn,buying about 10 million tonnes a year. Vietnam has seen a morethan six-fold jump in its purchases of the grain to 7.3 milliontonnes in 2015/16 from four years earlier, according to U.S.Department of Agriculture data.

For soymeal, buyers in Asia account for almost 30 percent ofglobal imports.

“Indonesia, Thailand and the Philippines will not beimpacted that much as far as corn is concerned because they haveall been trying to replace corn with feed wheat,” a secondSingapore trader said.

“But for meal, I think everyone will take a hit.”

In the past, Asian feed grain importers turned to India forcorn and soymeal purchases when South American supply was low.But the South Asian nation has been absent from theinternational market for the past few years amid growing localconsumption.

The shipping disruptions follow on top of unseasonaldownpours in April hitting the soy crop in Argentina, theworld’s biggest exporter of soymeal, while drought cut cornoutput in Brazil, the No.2 producer of that grain.

Source: Reuters

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