June 10, 2011

 

Japan fulfils most of July-September feed-corn import needs

 

 

Japan has completed nearly 75% of its feed corn import needs for the July-September quarter, and is presently sluggish on further purchases because of costly prices, trading executives said on Thursday (Jun 9).

 

Japan's buying is closely watched by traders, especially since the massive earthquake and tsunami hit the country in March, because it is world's largest importer of corn, buying around 3.2 million tonnes of feed-grade quality grain each quarter.

 

The disaster in the northwest of the country in March has not affected corn demand much, because feed mills are taking delivery at unaffected ports and then transporting the grain inland, said a Tokyo-based trading executive.

 

However, high global prices are having an impact.

 

Traders said Japan's compound feed manufacturers have purchased corn in recent weeks at US$2.60/bushel over prices of futures contracts on CBOT on a cost-and-freight basis for July-September shipment, up from a premium of around US$2/bushel for June shipment.

 

With CBOT near-month July corn futures currently trading around US$7.65/bushel, import costs are now above US$400/tonne, near record levels. Last month, July CBOT corn futures had slumped to around US$6.65/bushel.

 

According to trade estimates, final pricing has been completed for around 85% of the corn purchased by Japanese compound feed manufacturers for July shipment, around 50% for August shipments and 20% for September.

 

Japanese buyers agree to purchase corn at a fixed premium over CBOT contracts, and exercise their option to finalise prices at a date of their choosing.

 

"Importers are hesitant to do final pricing at current near-record high prices," said another trading executive in Tokyo.

 

Many importers have locked-in earlier purchases at an average CBOT price of around US$7.15-7.20/bushel, he said.

 

Many suppliers, however, contend that prices may rise even further and if the US lowers its corn stocks and production estimates. CBOT near-month futures may even test US$8.00/bushel, some said.

 

Corn stocks are already tight, and if weather remains as unfavourable as it has been for the last two months, we are heading for new record high price levels, said another executive.

 

Corn is already trading at a premium to wheat on the CBOT, reflecting tight supply, he said.

 

The US is world's largest exporter of corn, accounting for more than 50% of global trade.

 

US corn stocks are forecast to hit a 15-year low of 18.53 million tonnes as of end-August, according to US government projections that are due to be revised later Thursday (Jun 9). Carryover corn stocks in the US as of August 31, 2012, are forecast at 22.85 million tonnes.

 

Japanese corn importers said compound feed production in mills around Hachinohe port, which was hit after the earthquake, is back to 80% of normal, while around Kashima port it is around 75% of normal.

 

The ports of Ishinomaki and Kamaishi are also likely to be up and running by end-August. Mills around the four ports account for close to a third of Japan's total animal feed output.

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