CFR Northeast Asia corn prices for cargoes arriving between April and May, has surged to a near 2 1/2-month high of $268.25/mt on Jan. 7, or up 3.2% from the monthly average of $260.25/mt in December, Platts data showed, propelled by the rally in CBOT corn futures.
In the first four days of the new year, Asian corn prices have outperformed last year’s uptrend, extending a climb which began in May 2020. The Asian corn marker had reached its 2020 peak of $263.25/mt on Oct. 27.
The persistent uptrend is due to many factors, but least of all demand.
The futures rally has kept South Korean buyers mum on their private and tender purchases in the past few weeks. The last time feedmillers in South Korea procured a corn cargo was on Dec. 9 when the Feed Leaders Committee booked 65,000 mt from Louis Dreyfus Co. at $235.95/mt CFR for July delivery. The cargo origins were optional first-half June from US PNW or May shipment from South America. Based on the Jan. 6 close of the July CBOT futures contract at $4.94/bushel, the same cargo from the US PNW is valued at least $270/mt CFR Jan. 8, or around 14.4% higher, which explains buyers’ reluctance to make a move.
Freight costs have also firmed tracking the strength in crude oil markers. Panamax cargoes moving from US PNW to South Korea were priced at $23/mt in December, but is currently $2/mt higher, trading sources said. Over at the US Gulf Coast, barge costs in the Mississippi are on the rise and the market is taking this as a signal that demand is also on the rise, a market source noted.
Meanwhile, alternative feedgrain prices are providing corn with additional support. Feedwheat prices are equally strong and the last time it was sold in Asia was on Dec. 16, S&P Global Platts reported previously. A cargo was sold to a Thai buyer at $277.50/mt CFR. Since then, feedwheat inquiries have dried up and it is offered at around $290s/mt CFR South Korea on Jan. 7 for May-June arrival, market sources said.
Front-month CBOT March futures have added 70 cents, or 16.5%, month on month, to settle at $4.94/bu on Jan. 6. Market sources said managed funds are long corn futures by over 350,000 contracts, with about 80,000 contracts added in the past two weeks based on the Commitment of Traders’ report.
CME raises margins on grains futures
In light of the recent rally in grain futures, the CME Group has raised the maintenance margins for the nearby three corn futures with effect from Jan. 6, a company source said. Maintenance margins for March corn futures were raised to $1,100 per contract up from $975/contract with effect from Jan. 6. The May and July corn futures margin was raised to $ 1,050/contract and $1,000/contract, respectively, up from $975. The margin requirements were raised when futures base prices rose and when markets became more volatile. The margin increments are also for soybean meal, soybean oil, wheat, but the biggest hike was for the January soybean futures at $350 to $2,750/contract.
Prompt corn demand keeping buyers busy
Demand for January shipments has, however, gripped the Asian market in the past week following delays in Argentina. Buyers are scrambling to cover their shorts with Black Sea or US corn, market sources said. Vietnam was reportedly in the market covering prompt shipments with some Burmese corn.
However, it is not clear how many cargoes are affected by the Argentina strikes, which are ongoing since November 2020. Nevertheless, traders are expecting to see more short covering. Argentina’s corn export ban that is due to expire on March 1, 2021 is not affecting new crop shipments, which will start March-April, market sources said. However, the uncertainty of loadings there is keeping many doubtful.