October 1, 2010

 

Japan locks in first corn import deals for next year

 

 

Japan has finalised its first import deals for 2011 and around 150,000 tonnes of corn have been purchased for shipment in the first quarter so far, according to trading executives.

 

US No. 3 corn for delivery to Japan is being offered above US$300/tonne, cost and freight, for the first time in almost two years - and buyers are uncertain whether to lock in their deals to hedge against future price rises or wait for a downward correction.

Japan is world's largest importer of corn, buying an annual total of around 16 million tonnes mostly from the US, but also from South America.

 

"This year, some buyers have started purchasing corn for January-March shipment one month earlier than usual," said a commodities importer in Japan. He said volumes purchased would have been higher if not for the rise in prices.

 

Purchases of US No. 3 corn have been made around US$297/tonne, cost and freight and offers this week have been as high as US$302.50/tonne, said traders, noting that a weakening dollar has pushed up global prices for several commodities, including corn.

 

"The higher corn prices have more to do with a weak dollar rather than lower-than-expected crop yields in the US," said a Tokyo-based executive at a global commodities trading company.

 

The corn futures contract for December delivery on the Chicago Board of Trade ended five cents, or 1% higher Wednesday (Sep 29), at US$5.05/bushel. Prices for the most active CBOT corn futures contract are up almost 40% in the last six months.

 

Importers in Japan had been hoping prices would fall due to a bumper harvest in the US but the crop turned out to be below initial expectations, with the US earlier this month lowering its forecast for the domestic corn output in marketing year to August 2011 by around 1.5% to 334 million tonnes. Though the projection is still for a record crop, analysts expect the estimates will be further downgraded in the next monthly report.

 

Pricing of cargoes purchased for the October-December quarter has also been delayed, implying that Japan may have to pay much higher prices for corn imports despite having arranged for the purchases when prices were relatively lower.

 

The volume of feed corn imports for the October-December quarter will likely be 3.1 million tonnes.

 

Purchases have been made by fixing a premium over the corn futures on the Chicago Board of Trade, but buyers in Japan have yet to finalise the lock-in date for around half of the purchases.

 

Prices for many shipments were finalised earlier at US$255/tonne-US$275/tonne, C&F. Unless prices unexpectedly decline sharply, the remainder will likely cost at least US$300/tonne.