El Nino may underpin SE Asian grain prices
El Nino may underpin SE Asian grain prices
SINGAPORE (Reuter): Drought spawned by the El Nino weather phenomenon in Southeast Asia will help offset the bearish impact of a bumper U.S. harvest on grain futures prices, dealers and analysts said yesterday.
A severe dry spell has savaged the corn crop on Java in Indonesia and this will probably force Jakarta to import up to 300,000 tons of corn for the last quarter of the year, up from previous estimates by the trade of 200,000 tons, they said.
The Philippines is in the same fix, with drought threatening its main corn farms on Mindanao island, and the country may have to import close to a million tons in 1998.
The situation is not as severe in Thailand or Malaysia, although Bangkok has already expressed concern about a delay in rains which may hurt the rice crop.
"All of this is going to be a factor two, three months from now. It will be the factor that will prevent prices from collapsing in the United States," a trader said.
"Indonesia, especially, is already feeling the effects of El Nino. I think you can revise their corn imports for the end of the year up. I think you can put it at 300,000 tons from 200,000 tons," another dealer said.
Indonesia and Malaysia will not be able to depend on China as an alternate source of corn because a blistering drought there has damaged the corn crop.
The two countries, along with the Philippines, have been the leading buyers of Chinese corn in Southeast Asia. Thailand buys mostly U.S. or South American corn.
"It's been raining in China the past few days, but the damage has been done," a dealer said, adding the chances of Chinese corn exports on the same scale next year are poor.
The El Nino is caused by warm water appearing off the coast of South America around December. It disrupts global weather patterns by triggering drought and rampant floods.
The worst El Nino this century in 1982/83 caused billions of dollars in damage with Indonesia, Australia and the Philippines bearing the brunt.
More immediately, the Southeast Asian grains and oilseeds business was quiet with buyers sitting on the sidelines to wait for prices on the Chicago Board of Trade (CBOT) to calm down.
"Who wants to buy under these scary conditions in Chicago," a dealer said.
Traders said Thailand must still buy about 50,000 tons of corn to complete the 150,000 tons of duty-free imports allowed by the government, but an extension of the August 31 deadline will be needed by its millers.
"The shipment period is too short. It's pretty difficult to get anything in transit at this point," a dealer said.
One trader said they had a cargo of corn ready to go to Thailand, "but they didn't take it."
The problem was blamed on cost because trading houses were charging stiff premiums to divert cargo to Thailand, industry sources said.
Malaysia, on the other hand, has too much corn, soybeans and soymeal for the moment and would probably be out of the market for at least a month, dealers said.
In the soymeal business, dealers said Indonesia will be in the market soon for an estimated 60,000-70,000 tons of soymeal for last quarter delivery.
"That number may rise if their demand picks up and it could easily reach 100,000 tons," one said.