May 18, 2012


Japan expects corn prices down as imports slow



For July-September shipments, Japan has covered only 25% of its feed corn needs as it anticipates prices to fall coinciding with the upcoming US harvest, executives said Thursday (May 17).


More than half of the purchases for the period have been from South America and importers are hesitant to buy as they feel corn is overpriced, a Tokyo-based importer said.


The July contract's high premium over September and December has created uncertainty, he said. Japan is the world's top importer by volume, buying around 3.3 million tonnes of feed-grade corn each quarter.


The US, the world's top exporter, is heading towards a record crop that will ease global supply, which has been tight for more than 18 months now. Early this week, corn for July shipment was offered at a premium of US$2.15/bushel to the CBOT July contract. Offers for shipment in the first and second half of August were at US$2.62 and US$2.45 premiums to CBOT September, respectively.


The corresponding premiums for September shipment were US$2.13 and US$2.02, respectively.


"The premiums are too far apart and so are the prices, for making any purchase decision," a Singapore-based executive with a global commodities trading company said.


Another trader in Japan said at it is more feasible to buy on flat-price basis. Most importers expect CBOT December corn to fall to US$4.80 a bushel by early August.


More than 90% of US corn is already planted and an early harvest will also weigh on prices. Around half of July shipments and 30% of August, but hardly any for September, have been purchased, traders said.


Final pricing too has been completed only for a half and a third of the shipments purchased for July and August respectively. Japanese feed millers are aggressively seeking South American corn and close to a third of the imports for the next quarter will be from the region.


Around 300,000 tonnes have already been purchased from Argentina and 200,000 tonnes from Brazil, they said. Earlier this week, Brazilian feed corn was US$22/tonne, US$24/tonne and US$5/tonne cheaper than the US origin, on a delivered basis at Japanese ports for July, August and September shipment respectively.


Argentina's corn is difficult to source due to a drought but it is still US$15/tonne cheaper than the US.

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