September 21, 2007

 

Japan's Zen-Noh Q4 feed prices down

 

 

Zen-Noh, Japan's biggest feed maker, said on Thursday (September 20) it would cut October-December compound feed prices by 400 yen (US$3.45) a tonne on average from the previous quarter due to lower procurement costs.

 

The decline is the first since the July-September quarter last year. Zen-Noh, which takes a 30 percent share of the domestic livestock feed market, said a fall in Chicago corn prices and a higher yen have slashed costs despite a steep rise in ocean freight costs and higher prices for bran and other feedstock.

 

Japan relies almost entirely on overseas suppliers for corn, traditionally a major feed component.

 

Zen-Noh also said freight rates have risen sharply, with modern Panamax rates for the US Gulf-Japan route rising to US$95 to US$99 per tonne from US$75 to US$79 in early June, and will likely stay high as China is expected to boost crude steel output.

 

Zen-Noh, or the National Federation of Agricultural Cooperative Associations, did not elaborate further on its feed prices. A manager at Zen-Noh's livestock department declined to comment on ways to further cut its procurement costs, like diversification of corn origin from the main supplier, the United States.

 

Industry sources said Japan's compound feed prices are estimated at around 53,900 yen (US$465) on average for October-December, up more than 20 percent from a year earlier. Other feed makers, such as Nosan Corporation, are expected to make similar price hikes for the period.

 

But price increases in the previous four quarters mean farmers should pay more than what they pay currently as Japan's private scheme to curb sharp fluctuations in face-value feed prices works reversely this time, industry sources said.

 

The price-stabilisation funds raised by feed makers and farmers provide money to ensure that the price farmers pay is equal to the average of feed prices in the previous four quarters.

 

Until the April-June quarter, quarterly payments from the funds had successfully reduced farmers' actual feed costs to less than a quarter-on-quarter rise in face value.

 

In July-September, Zen-Noh raised its feed prices by 1,100 yen a tonne on average from the previous quarter.

 

Farmer payments during the period are estimated at around 47,000 yen, up from around 45,150 yen in the April-June quarter, as the funds exercised the option for a 4-percent price cap for the first time since the scheme started in 1999.

 

The funds are expected to exercise the 4-percent price cap option this time again so that extra subsidy will limit the actual payments by farmers to 4 percent more than what they pay in July-September, industry sources said.

 

Even if the funds do so, farmer payments would be around 48,900 yen, up some 14 percent from a year earlier, according to a Reuters calculation.

 

Japan is the world's biggest corn importer, buying some 12 million tonnes a year of corn for feed use from abroad.

 

US$1 = 114.93 yen (As of September 21, 2007)