March 28, 2011

 

Japan still in need of US agricultural products

 

 

Despite the recent earthquake and tsunami, export figures show that the calamity did not destroy Japanese demand for the US farm products, such as corn and beef.

 

In fact, CBOT corn went above US$7, and hog and cattle prices increased on Thursday (Mar 24).

 

Last week's USDA export report was crucial because it was the first to cover the week after the earthquake and tsunami that hit Japan, which is the biggest buyer of US corn and third biggest purchaser of US beef .

Corn had gone as high as US$7.40 on the CBOT before the March 11 disaster, which set off panic among investors and drove the price of corn down to a low of US$6.10. Two weeks ago, buyers returned and a two-day, US$0.68 per bushel boom Thursday and Friday put momentum back into corn.

 

Traders think demand for corn will remain strong throughout 2011. The December contract, which prices this year's crop, is up US$0.09 per bushel to US$6.19.

 

The May contract increased US$0.22 per bushel to close at US$7.03.

 

Soy was up US$0.03 per bushel to US$13.54.

 

Corn and soy together will generate about US$20 billion in cash to Iowa's economy.

 

Arlan Suderman of Farm Futures Magazine said, "The lead May contract pushed above US$7 on fresh export chatter. China has been the favourite subject of this chatter of late, but the commercial buying may have ties to purchases by Mexico and/or Japan as well."

 

Net weekly export sales for corn came in at 895,100 tonnes.

 

Japanese purchases contributed 221,700 tonnes and were booked after the earthquake.

 

"Demand from Japan is still there," said West Des Moines commodity trader Don Roose of US Commodities.

 

Trader Tomm Pfitzenmaier noted a 2% increase in ethanol production two weeks ago. He said the drop in corn prices after Japan's earthquake gave ethanol producers some of the best margins they have seen in a long time and you would expect that they took advantage of the situation to assure themselves good margins for a while.

 

Traders have also focused on the wet and cold weather in the Dakotas and Minnesota, which could delay corn planting.

 

Cattle prices finished strong after the USDA report showed a 33% gain in exports over last year. Live cattle for April delivery rose US$1.72 per hundredweight to US$115.82 and April feeder cattle, the younger animals headed for feedlots, were up US$1.12 to US$132.62.

 

Japan bought 3,900 tonnes of beef two weeks ago, its largest weekly purchase since mid-February, and traders saw this as a positive trend. Export sales for the week totalled 14,400 tonnes compared with the prior four-week average of 13,200 tonnes. Cumulative sales for 2011 reached 241,000 tonnes, up 33% from last year.

 

Hogs for April delivery gained US$0.25 per hundredweight to reach US$90 again on reports that hog sales to Japan have continued. Hog prices for summer delivery continue to be US$100 per hundredweight or better, continuing prospects for higher retail meat prices.