Asian millers that churn out animal feed are expected to face a squeeze in supplies of key ingredients corn and soymeal in coming weeks as heavy rains disrupt shipments from major exporter Argentina.
Cargoes from the South American nation have been facing delays for the past few weeks due to strong rainfall, but millers have been able to operate using exports that were already en route and inventory, according to trade sources.
But as those stocks dwindle, Asian feed makers are set to feel the pinch from tightening supply, likely boosting benchmark prices already driven up by unfavourable crop conditions in South America.
Chicago soymeal futures have surged more than 50 percent since early April, while corn has jumped by about a quarter.
“I think the real tightness in supplies will come from July onwards,” said a trading manager with an international trading company in Singapore.
“The situation seems to be improving slightly in recent days but even if a boat leaves today, it will take 45 days to get to Southeast Asia.”
Vietnam and South Korea are likely to be worst-hit in the region by tightness in corn supplies as they depend heavily on South American feed materials, traders said.
South Korea is the world’s third-largest importer of corn, buying about 10 million tonnes a year. Vietnam has seen a more than six-fold jump in its purchases of the grain to 7.3 million tonnes in 2015/16 from four years earlier, according to U.S. Department of Agriculture data.
For soymeal, buyers in Asia account for almost 30 percent of global imports.
“Indonesia, Thailand and the Philippines will not be impacted that much as far as corn is concerned because they have all been trying to replace corn with feed wheat,” a second Singapore trader said.
“But for meal, I think everyone will take a hit.” In the past, Asian feed grain importers turned to India for corn and soymeal purchases when South American supply was low. But the South Asian nation has been absent from the international market for the past few years amid growing local consumption.
The shipping disruptions follow on top of unseasonal downpours in April hitting the soy crop in Argentina, the world’s biggest exporter of soymeal, while drought cut corn output in Brazil, the No.2 producer of that grain.
Source : Financial Express