August 24, 2011

 

Japan yet to fulfil feed corn import needs

 

 

Sixty percent of Japan's corn import requirements between October and December this year have not been purchased by the country and buyers are hoping for a downward correction in prices, according to trading executives on Tuesday (Aug 23).

 

According to Dow Jones, Japan's purchases are closely watched by traders as it is the world's largest importer of corn, buying around 3.2 million tonnes of feed-grade quality grain each quarter.

 

Japan has so far purchased around 1.3 million tonnes of feed corn for shipment in the fourth quarter, the executives said.

 

Almost all the purchases made so far are from the US, an importer in Tokyo said.

 

Another trader said Japanese importers consider current price levels of around US$7.40 a bushel for the most-active December corn futures contract on the CBOT to be too high.

 

He said Japan is buying corn around US$2.10/bushel over CBOT December futures, cost and freight.

 

According to trade estimates, final pricing has been completed for around 30% of the corn purchased by Japanese compound-feed manufacturers for October shipment, and none for November and December shipment.

 

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

 

The average futures price at which premiums were locked in for October is around US$6.75/bushel, and on this basis the C&F delivered price works out to be around US$350/tonne, said a Japan-based executive with a global commodities trading company.

 

Traders said that at current prices, imports will cost closer to US$375/tonne, C&F, which is keeping buyers on the sidelines. In June, offer prices rose above US$400/tonne.

 

Traders expect prices to fall once the new crop in the US hits the market. The US is the world's largest corn exporter with more than 50% share in global trade.

 

Earlier this month, the USDA lowered its estimate for US corn output in the marketing year that begins September 1, to 328 million tonnes from 342 million tonnes.

 

Analysts said that since pollination of the US corn crop is complete in most areas, any further lowering of yield projections seems unlikely.

 

They said Japanese compound feed manufacturers may start pricing their cargoes for November-December shipment once CBOT corn falls below US$7.00/bushel.