November 28, 2011

Japan buys wheat as a substitute of corn

Japan may buy less of corn as feed-wheat imports expand this year to its highest level since 2001 as it seeks to cut costs, according to Ikuho Tomita, deputy director at the agriculture ministry's feed supply and demand planning office.

Feed-wheat imports may surge to 430,000 tonnes from 112,000 tonnes in the year ended March 31, he added. Imports were 473,000 tonnes in 2001.

Higher imports may stem a 25% decline in Chicago wheat futures this year as the United Nations expects the biggest-ever global harvest while Russia and Ukraine eased export restrictions, boosting supply.

Feed wheat was offered to Japanese buyers at about US$50 a tonne cheaper than US corn as shippers compete for sales, said Nobuyuki Chino, president of Continental Rice Corp. in Tokyo.

"Increased purchases of feed wheat means Japan's corn imports will decline, as overall demand for feed grains is not growing," Tomita said in Tokyo. Japan's feed makers, recovering from damage caused by the March 11 earthquake and tsunami, "are taking advantage of an expanded gap in purchasing costs between corn and wheat."

The agriculture ministry, which controls overseas purchases and domestic sales of wheat to stabilise supply, has approved feed makers to buy the grain beyond the government-set ceiling of 300,000 tonnes this fiscal year.

This will be the first breach of the limit in 48 years, as demand for corn substitution increased on a widening price gap, Tomita said. Japan imported 169,318 tonnes of feed wheat in the nine months ended September 30, data from the finance ministry showed. Half was from Australia and half was from Canada.