RI seen buying corn as El Nino fears emerge

RI seen buying corn as El Nino fears emerge

SINGAPORE (Reuter): Indonesia is said to be negotiating to buy up to 180,000 tons of corn for last quarter delivery over fears that a drought caused by the El Nino weather phenomenon may hit the crop in Java, traders said yesterday.

"Some of the Indonesians are beginning to take positions and are asking for quotes. They're looking to buy between 150,000 to 180,000 tons of corn because the local crop is hurting from a drought caused by El Nino," a senior trader told Reuters.

Another dealer for a U.S. commodity house said Indonesian buyers "are picking up several cargoes for last quarter delivery and would want a price of about US$120 (a ton C&F)."

Traders said the lowest recent offers the Indonesians received for U.S. corn for October/December shipment ranged between $123- $124 a ton C&F.

But regional dealers quoted U.S. corn coming into Southeast Asia for September/October shipment on a Panamax slightly higher at around $126-$128 a ton C&F after corn futures prices on the Chicago Board of Trade (CBOT) rose overnight.

Drought is beginning to pose a threat to the corn crop on Java and some dealers were apprehensive on whether this is linked to El Nino. Experts in Indonesia have said the dry weather is seasonal and is not linked to El Nino.

El Nino can wreak havoc with weather patterns around the Asia- Pacific rim when unusually warm ocean temperatures develop off the western coast of South America.

The most severe El Nino in recent memory took place in 1983 and caused blistering drought in Indonesia, South Africa, the Philippines and Australia while triggering floods in India and severe winter storms in California.

Scientists have said the current El Nino, which is said to be the strongest since 1983, is likely to peak in December.

"The El Nino effect on...Indonesia is worrying. Java has not gotten much rain," a grains analyst said.

Even though corn prices are trending lower, drought in Indonesia and dry conditions in China's grain-growing provinces may eventually stop the slide in Chicago futures prices.

"If it's hot and dry during pollination in China in the last week of July and early August, the corn crop can get zapped very easily. There won't be a Chinese corn program to speak of if that happens," one dealer said.

Buyers from Thailand and Malaysia are not expected to enter the market anytime soon, dealers said.

"You can forget Malaysia. They have too much corn and too much soymeal. They will not be in for the next two months," a trader said.

Thai buyers, on the other hand, were waiting for a decision from the Commerce Ministry on whether to allow the duty-free importation of 100,000 tons of corn.

"The Thai business is going very slowly," a dealer said. Most of the trade is keeping a close watch on what looks like a bumper U.S. corn and soybean crop.

Traders said, however, that some people will be tempted to buy soon given the potential problems crops may face from El Nino in China, Indonesia and Australia.

"The crop in the U.S. looks good, but there are a few speed bumps along the way," one dealer said.