February 1, 2012

 

Japan buys 1.5-million-tonne feed corn from Europe

 

 

In order to cut costs amid higher US prices, Japan has purchased at least 1.5 million tonnes of feed-grade corn for January-March shipment from Europe, trading executives said Tuesday (Jan 31).

 

This is Japan's biggest-ever purchase of European corn in any quarter and marks a significant shift in global corn trade patterns. East Asian countries such as top importer Japan have traditionally relied on the US and to a lesser extent on South America for their requirements.

 

Eastern and Central European countries, particularly Ukraine, have harvested a bumper crop and their offers for delivery to East Asia were up to US$25/tonne cheaper late last year.

 

"Importers were initially reluctant to shift purchases because broken kernels in European corn are higher than the US but high prices have encouraged them to experiment," a Tokyo-based trading executive said.

 

However, further purchases of European origin in the near term will be slow due to limited capacity for shipment at Baltic Sea and Black Sea ports and lower availability ahead of the next harvest.

 

Japan buys around 3.3 million tonnes of feed-grade corn each quarter and is yet to buy around 1.1 million tonnes for the January-March period, which will mostly be from the US, traders said.

 

The country has so far purchased around 700,000 tonnes of US corn for the January-March quarter, the lowest in years. The US is the top exporter and usually has more than 50% of the global trade, but prices have risen due to stronger local demand and lower-than-expected output due to adverse weather.

 

Purchases for March shipment are mostly open and likely to be from the US, another trader in Tokyo said. Dry weather in Argentina can push up imports from the US for the April-June quarter too, he said.

 

Japan is buying corn around US$2.05 a bushel over CBOT May futures, basis cost and freight, while earlier purchases were at US$1.95-2.00 above.

 

Final pricing has been completed for half of the corn purchased by Japanese compound-feed manufacturers for February shipment, traders said.

 

Japanese buyers purchase corn at a fixed premium over CBOT contracts, and exercise their option to finalise prices at a date they choose.

 

The average futures price at which premiums were locked in for February is around US$6.15 a bushel, and on this basis the C&F delivered price works out to US$320/tonne.