North Asia scrambles for corn on US Pacific North West supply disruptions
By Samar Niazi, Agriculture editor
Welcome to The Snapshot, a series examining the forces shaping and driving global commodities markets today.
In this episode, we’ll take a look at corn supply disruptions in the U SPacific North West, and how it’s affecting the North Asian market.
Snow storms and excessive ice caused by the La Nina weather pattern have caused corn train delays from the Midwest and other corn growing regions to US PNW elevators. Our sources tell us the logistics situation has not been this bad in 20 years.
Cargoes bound for Japan, Taiwan, and South Korea face delays
Just how big is the problem?
The US PNW captures bulk of the north Asia business, with most of the buying done between October and April. But due to the supply disruptions, buyers from Japan, Taiwan, and South Korea have been waiting since late-December and January for cargoes.
With very low volumes of corn at the elevators since late December, vessels headed for north Asian ports have been waiting at anchorages. At one point in January, there were about 100 vessels reportedly in the lineup at the US PNW. And then, in mid-February, several US elevators declared force majeure due to inland logistics.
Taiwanese buyers were the first to be affected and suppliers have reportedly paid large shipment delay penalties. Taiwanese millers have bought corn from South Korean sellers as a stop gap measure – and paid very high prices.
Japanese corn traders are also hit hard. They have bought corn at high prices from unusual origins like China, or part cargoes from Korea or Vietnam to fulfill their immediate demand.
Japanese trading firms have bought Chinese corn at prices around $220 to $225/mt FOB China northern ports.
The CFR Japan corn price is estimated to be at $233, much higher than the Platts CFR South Korea price assessed at $192.50, on the same day. There is usually a $1/mt difference in freight between South Korea and Japan.
South Korea was the least affected among the North Asian corn importers. A bird flu epidemic late last year caused a massive poultry cull and reduced demand. Some suppliers into South Korea also swapped their US corn cargoes for Black Sea corn. But latest reports from the South Koreans suggest that their US PNW cargoes are now also delayed.
Asian feed milling market scrambling for corn supply
The situation should improve as weather clears up in the US PNW by March-April, but right now there is a scramble for corn in the Asian feed milling market.
Traders are trying to substitute US PNW cargoes with corn from the US Gulf or Black Sea region. However, these origins bring their own difficulties – US Gulf cargoes take around 40 days or more to reach North Asia, while Black Sea corn prices have become firmer in response to the US PNW situation.
Meanwhile, South Korean corn tenders awarded during the previous week were still transacted at competitive prices between $192 and $194/mt CFR South Korea, and traders expected the corn to originate from the US PNW, in the hope that the weather would improve for cargoes loading in April.
Until next time on the Snapshot, we’ll keep an eye on the market.