November 6, 2012


Japan to import corn worth US$20 million to boost stockpiles



As the nation shifts purchases from the US to Ukraine and Brazil, Japan is set to import corn worth US$20 million to help feed mills boost stockpiles and safeguard food security.


Feed makers will probably expand inventories to 750,000 tonnes in the 12 months starting April 1, or about 7% of consumption, from 450,000 tonnes this year, said Ryosuke Hirooka, deputy director for the feed division of the Ministry of Agriculture, Forestry and Fisheries. The government may spend JPY1.62 billion (US$20 million) to meet part of the cost, he said in an interview in Tokyo.


Japan purchased a record amount of corn from Brazil and Ukraine this year, cutting US supplies to the lowest level in at least two decades, as drought sent Chicago futures to a record. Shipments from South America and Europe were delayed, forcing feed mills to draw on stockpiles, Hirooka said.


"Diversification of supply raises the risk of instability in shipments" because transport facilities in some emerging markets are not as good as the US, said Tetsuhide Mikamo, director at Marubeni Research Institute. "Holding higher stockpiles is one option for managing the risk."


An increase in inventories may curb the decline in corn imports, which have slumped to a 26-year low as feed mills use more wheat. The US was the top corn exporter in the 2011-12 marketing year, followed by Brazil, Argentina and Ukraine, USDA data show.


The US supplied 5.1 million tonnes of feed corn to Japan in the first eight months, or 78% of imports, according to the agriculture ministry. Ukraine shipped a record 822,226 tonnes, or 13%. The US provided virtually all the country's requirements in 2008.


Japan continues to boost purchases of cheaper corn from South America and the Black Sea, eroding US market share, said Nobuyuki Chino, president at Continental Rice Corp. The US is set to supply 1.5 million tonnes or 56% of imports in the first quarter of 2013, said Chino, who has traded grains for more than three decades. Brazil will provide 800,000 tonnes and Argentina 150,000 tonnes, while Ukraine and others ship the rest.


The cost of importing Brazilian corn, including freight, is about US$35 per tonne cheaper than the US variety, Chino said. Argentine corn is offered US$30 below US grain, while Ukrainian shipments are US$15 less expensive, he said.


Japan's corn imports for feed, food and industrial use may drop almost 3% this year from 15.3 million tonnes in 2011 to the lowest since 1986, said Chino. Feed makers are also using dried distillers' grains with solubles instead of corn.


Futures in Chicago climbed to a record US$8.49 a bushel on August 10 and traded at US$7.39 at 5:45 p.m. Singapore time Monday (Nov.5).

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