March 18, 2011

 

Japan's feed grain imports to slow

 

 

Japan's feed grain imports could slow to a drop in the near months as quake-hit feed mills make importers wary of signing new deals.

 

Japan will instead resort to more imports of processed commodities such as soyoil, wheat products and meat to satisfy immediate needs as it limps back from last week's earthquake and tsunami, which hit a fifth of the country's animal feed makers.

 

Benchmark US grains have dropped nearly 6% since Friday's (March 11) earthquake pushed Japan to the brink of a nuclear disaster as investors worried about prospects for the world's third largest economy fled risky assets.

 

Almost 20% of Japan's animal feed plants were badly damaged and few units will resume operations within the next six months, forcing the world's biggest importer of pork and chicken to make up the shortfall from the international market.

 

"Feed plants are flooded, silos are cracked and there is continued shaking, so livestock producers may skip production for a couple of months due to feed shortage and house damages," said Jim Echle, who heads US soy industry body ASA International Marketing in Japan.

 

"Some pig producers are seriously damaged with no feed, fuel or power for warming the baby pigs, it is really a terrible situation, Echle added.

 

Feed-making facilities were affected in the quake-hit Tohoku region, which makes up about 18% of Japan's annual feed output of 24 million tonnes, industry sources say.

 

And the Kashima area in nearby Ibaraki, which also produces some 4 million tonnes of feed a year, has suffered damage.

 

"It could take half a year for feed manufacturers to fully recover," said Nobuyuki Chino, president of Tokyo-based trading firm Unipac Grain. "Japan will need to import more pig and chicken meat for the next few months."

 

But a plentiful supply of foodgrains will avert a spike in domestic prices.

 

If the world's third largest economy suffers in the aftermath of Friday's earthquake, analysts say, it could hurt the country's grain and meat imports, a bearish factor for US corn, wheat and soy futures.

 

Economists' estimates of losses to Japanese output from damages to buildings, production and consumer activity ranged between JPY10 trillion (US$0.12 trillion) to JPY16 trillion (US$0.20 trillion), at worst one-and-a-half times the losses during the 1995 Kobe earthquake.

 

Most expected the economy to contract in the second quarter of 2011 and a few economists also flagged the risk of prolonged disruption to consumers and companies and a decline in economic output through 2011 should power outages persist until December.

 

"If we do see significant adverse economic reaction in Japan to this disaster, then we might see an overall decline in meat consumption. The magnitude of any potential decline is uncertain at this point of time," said commodity strategist Luke Matthews of the Commonwealth Bank of Australia.

 

Operators of a quake-crippled nuclear plant in Japan said they would try again on Thursday to use military helicopters to douse overheating reactors, as US officials warned of a rising risk of a catastrophic radiation leak from spent fuel rods.