Commodity prices
The Indian corn prices are little down from last week. Average prices on Dec 30, 2004 were reported at Rs.5055 per MT ($113.6) at the market yards. Last year at the end of the year the average price was at Rs.4800 per MT ($106) at the market yard, a 5.3 percent increase over last year.
Prices in US are a little higher than reported for last week. Corn for Jan and March 2005 delivery is reported at $99 & $98.5 per MT (FOB US Gulf). Sorghum prices were reported at $100 - $101 per MT (FOB US Gulf) for Jan & March delivery. Barley prices are reported at $110 per MT (FOB PNW) for Jan to March deliveries.
Corn co-products prices are lower than expected. Corn Gluten Feed is reported to trade at $ 88 per MT for deliveries in Jan – March 2005 (FOB US Gulf), while Corn Gluten Meal (60 percent protein) was reported at $ 297 per MT (FOB US Gulf). The Soy meal prices (48 percent protein) were reported to be much lower than expected at $187 per MT (FOB US Gulf). Prices in India are reported at $195 per MT (at the origin – Central India – Madhya Pradesh). Last sales were reported at $240 - 245 CNF South East Asia. The higher local prices are a setback for Indian exports, but this has helped in increasing utilization of Soy meal in the domestic poultry industry.
Freight rates ease
Reports from Japan and US suggest easing of freight rates. Spot ocean freight rates are down from their November highs as China and other countries, which were buying raw materials, have suddenly stopped purchases. The rate for mid-size ships for transportation of coal and grain shipped from the US Gulf to Japan has declined slightly more than 15 percent.
On the world-scale schedule index -- a gauge for determining spot prices for crude oil tankers -- the rate for shipping from the Middle East to Japan has plunged to 135 -- down 57 pct from the a 31-year high of 315 recorded just a month ago. The rate for the Mideast-US route has dropped to 130 from 240 early last month.
The fall could be due to many factors, the report suggests. US oil refiners have cut their purchases as inventories increase. Also China and Europe is seen to have completed their purchases on iron ore and coal, which has helped ease the ocean freight market.
Availability of more containers in the market is seen as the reason for a reduction in container rates as well, which will further help in the reduction of freight rates.
World maize consumption up 5%, prices remain low on abundant US supplies
(From Grainnet.com)
World maize consumption in 2004/05 is now estimated at 678 million metric tons (MMT), nearly 5% more than last year and well above the previous forecast of 666 MMT. Unexpectedly abundant supplies from the US are keeping prices low compared with other feedstuffs, helping to boost local consumption. However, apart from the US, where maize use for ethanol continues to leap ahead, demand is fairly sluggish. In Asia, a combination of recurrent disease problems affecting poultry and pigs and the effects of opening domestic markets to imports of meat products has stalled growth in livestock numbers. As a result world consumption will rise only modestly over the forecast period to 686 MMT in 2005/06 and 696 MMT in 2006/07.
World trade maize in 2004/05 is currently forecast at 77 MMT, about 3 MMT less than last year and the lowest since 1999/2000. It is forecast to increase only slightly to 80 MMT in 2005/06 and 83 MMT in 2006/07. Livestock farming in South and East Asia seems to be reaching certain maturity, as most people who are likely to eat grain-fed meat probably now do so. Some of the major importers (South Korea, Taiwan) have been rocked by disease problems affecting pigs and poultry. Furthermore, WTO-imposed reductions in tariffs on meat imports have forced domestic livestock industries to be more efficient in feed usage.
After falling sharply in the first months of 2004 in the wake of an outbreak of avian influenza, China's compound feed production resumed its growth, helped by a switch by consumers to pork. Consumption of beef and dairy products is also rising rapidly. Because of the poor state of China's grasslands cattle need supplementary feeds. Maize consumption in 2004/05 is estimated at 128 MMT, 3 MMT more than this year's comparatively good crop. China will continue to be a net exporter in 2004/05, but only just, exporting only around 4 MMT, and at the cost of a further sharp depletion of stocks. Water is an increasing concern. Maize production will struggle to keep up with use over the next few years, and it is expected that China will become a net importer of maize by 2006/07, and possibly sooner.
Taiwan's Feed Industry Association predicts that the country's demand for maize (met almost entirely from imports) will drop by over 20% in 2005 because of lower meat production. Import quotas on chicken meat, which have secured a market share of less than 10% of consumption for local producers, are to be eliminated at the beginning of 2005 under World Trade Organization (WTO) arrangements. Poultry imports are predicted grow by 50% in 2005 and to continue rising rapidly until the domestic industry restructures and lowers its costs. Meanwhile, disease outbreaks are curtailing pork production. Demand for feed grain is expected to decline as domestic farmers struggle to compete with imports. As a result, maize imports are forecast to fall from 4.5 MMT in 2004/05, to around 4 MMT in the next two years.
In the EU, a much-improved maize harvest is expected for 2004/05, after last year's drought. The maize crop is estimated at 52 MMT, up 30% on the 2003/04 figures. Consumption is also expected to increase in 2004/05, but will be limited by the EU's ample supplies of domestic wheat and barley. Apart from the limited amounts to be bought from the US under long-standing WTO reduced-levy agreements, the feed deficits of the original members (in particular Spain) will be met by the newer member states--notably Hungary, where the 2004/05 harvest is likely to be 80% higher than last year. As a result of higher domestic production, total EU imports in 2004/05 are forecast to fall from 5.5 MMT in2003/04 to 2.4 MMT in 2004/05, and remain at a similar level in 2005/06 and 2006/07.
While all other countries including US, EU, South America, Middle East and South East Asia are expected to benefit from low maize prices, Indian end users are in for tough times. The corn prices are higher than last year and with imports not possible due to the import duty and the TRQ, the exporters of value added products particularly chicken, starch, value added starchs, malto-dextrins, corn gluten meal are expected to lose their markets in Middle East and South East Asian countries as their cost of production will be higher. The corn production in In India during the Khariff (harvest in Oct 2004) was 9.8 MMT while in Rabi (harvest in Feb – March 2005) is expected at 1.6 - 1.7 MMT, the deficit is expected to be close to 1.5 - 1.6 MMT. (based on the total consumption of 13.3 MMT) which will effect prices further in April – Sept 2005, when maize is not available.
Amit Sachdev
Consultant
U S Grains Council
E Mail: bluecross@touchtelindia.net
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