February 17, 2010

Japan snaps up huge amount of South American corn

Corn cargoes from South America to Japan are expected to reach up to one million tonnes this year, which will be Tokyo’s largest purchases of non-US feed corn in more than a decade.

Japan has already booked about 300,000 tonnes of Brazilian and Argentine corn since January, and more deals are likely as feed millers seek alternative supply on quality issues that are bugging US corn, according to traders.

The US faced weather problems at the time of harvesting, and Japanese feed mills which want high quality corn will look at other sources and South America is likely to have a good crop this year, said a Singapore-based grains trader.

Japan, which buys 10-12 million tonnes of corn annually for the feed industry, has bought nearly all of the grain from the US, apart from 1998 when shipments from Argentina rose to 1.2 million tonnes.

Japanese compound feed manufacturers are unhappy with US corn quality, said Nobuyuki Chino, president of Tokayo-based trading company Unipac Grain.

However, he estimated that Japan will import less than a million tonnes from South America, and the rest will come from the US.

Supplies of higher grade US corn are tighter than normal this year because wet weather during last autumn forced many farmers to harvest less mature grain at higher than normal moisture, factors that decrease the feed value of corn. At the same time, near-perfect growing conditions have boosted prospects of good quality and plentiful supplies from Brazil and Argentina.

The quality of southern hemisphere corn is better in terms of protein content, as South American corn is somewhere close to 8.0 to 8.5% (protein content) while US corn in some cases is less than 7%, said Chino.

Argentina's 2009-10 corn harvest is expected to reach 19.3 million tonnes, nearly 5% more than the earlier outlook, as ideal climate conditions boost crops, Buenos Aires Grains Exchange said last week.

Still, Japan will continue to rely on the US for much of its corn imports because of higher freight costs, export restrictions and port infrastructure problems in South America.

No one can take over the US position and supply such large quantities, and the voyage time is shorter from the US, said an executive with an international trading company in Singapore.

The executive added that there will be port congestion and other problems in Brazil and Argentina.