March 27, 2007

Japan corn and soy trade at a standstill on high freight rates
 

 

Japanese buyers of corn and soybeans are expected to stay on the sidelines this week as high freight rates make them less fervent on immediate covering requirements, traders said on Monday (March 26).

 

The Japanese corn market was idle on a period when buyers start purchasing shipments for the July-September phase after its near completion of procurement for the April-June quarter.

 

Japanese buyers were estimated to have bought about 100,000 to 150,000 tonnes of feed corn last week to bring down remaining purchase requirements for the second quarter of 400,000 tonnes.

 

Requirements for feed corn this quarter were estimated at roughly 3.1 million tonnes.

 

A trader said the volatility of corn prices have slowed trading as feed makers hold on to their purchases while freight rates remain high.

 

Spot rates for panamax vessels have been surging in the past month due to increased demand from China.

 

Tokyo grain traders said Chinese charterers were using panamax vessels to import coal and iron ore due to the scarcity of large-class capesize ships.

 

A panamax-class vessel is used to transport grains and other dry bulk commodities of about 55,000 to 80,000 tonnes.

 

Benchmark spot rates for panamax for the US Gulf to Japan route were quoted around US$66 per tonne against about US$53 around the start of the year.

 

The situation has had an extensive impact on the shipping market.

 

A trader said Japanese importers have been using handymax vessels--a carrier that accommodate 22,000 to 40,000 tonnes of dried commodities--to ship grains amid the surge in its rates last month.

 

Spot rates for handymax vessels for the US Gulf to Japan were around US$56 a tonne from about US$45 a month earlier.

 

In the soybean market, Japanese buyers were estimated to have fulfilled about 50 percent of their requirements for May, but activity was expected to be slow this week.

 

Japanese traders are eyeing soybeans from Brazil, which have started shipping out large quantities to world markets in March, although traders were worried about rising prices.

 

Traders said the premium for soybeans from Brazil was around 30 cents a bushel.

 

Brazilian soybeans are preferred by Japanese buyers for their higher-than-average protein and oil content, which is more suitable to produce the high-protein meal favoured by domestic feed makers.

 

Monthly soybean purchases from Japanese oilseed crushers have totalled about 240,000 to 250,000 tonnes on average.