June 22, 2011


Japan purchases big corn shipment on falling prices



Japan has purchased around 300,000 tonnes of feed-grade corn for July-September shipment at lower levels than other recent deals, taking advantage of the latest fall in prices, trading executives said on Tuesday (Jun 21).


The fall in import premiums and outright prices will likely boost near-term demand from Japan, the world's largest corn importer, and could prevent a further downward correction.


The executives said Japan's compound feed manufacturers are buying corn around US$2.35 a bushel over September futures on the Chicago Board of Trade, cost and freight. The CBOT September contract is trading around US$6.95/bushel.


At current prices, this works out to be around US$366/tonne, C&F, according to Dow Jones Newswires calculations.


Japan also finalised some trades for August shipment around US$2.30/bushel over CBOT's September contract, C&F. Japan buys around 3.2 million tonnes of feed-grade-quality grain each quarter.


Near-month CBOT July corn futures declined around 12% last week to slightly below US$7/bushel, after hitting a record high of US$7.9975/bushel on June 10. Japan has now covered almost 85% of its corn import requirements for July-September, the executives said.


Corn import premiums declined last week. Japan made earlier purchases around US$2.60/bushel over CBOT futures, said an importer in Tokyo.


He said purchases for July shipment are almost complete, and importers are now focused on purchases and final pricing for shipments in August and September.


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


According to trade estimates, final pricing has been completed for all of the corn purchased by Japanese compound feed manufacturers for July shipment. Around 60% of final pricing has been completed for August shipments and 30% for September.


As the market fell last week, importers priced in at least 350,000 tonnes of corn purchases made previously. Several cargoes were priced when CBOT prices were moving between US$7.00 and US$7.30 a bushel.


Corn stocks in the US are tight, and there are concerns that prices may rally again. Corn is already trading at a premium to wheat on CBOT, reflecting tight supply. The US is the world's largest exporter of corn, accounting for more than 50% of global trade.


Earlier this month, the US reduced its corn output forecast for the marketing year starting September 1 by around 2%, to 335.3 million tonnes.

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