Bloomberg News

Japan to Lift Corn Reserves as Imports Rise From Ukraine

November 05, 2012

Japan, the world’s largest corn importer, is set to spend $20 million to help feed mills boost stockpiles and safeguard food security as the nation shifts purchases from the U.S. to Ukraine and Brazil.

Feed makers will probably expand inventories to 750,000 metric tons in the 12 months starting April 1, or about 7 percent of consumption, from 450,000 tons this year, said Ryosuke Hirooka, deputy director for the feed division of the Ministry of Agriculture, Forestry and Fisheries. The government may spend 1.62 billion yen 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 U.S. 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 U.S., 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 U.S. was the top corn exporter in the 2011-2012 marketing year, followed by Brazil, Argentina and Ukraine, U.S. Department of Agriculture data show.

Brazil, Ukraine

The U.S. supplied 5.1 million tons of feed corn to Japan in the first eight months, or 78 percent of imports, according to the agriculture ministry. Ukraine shipped a record 822,226 tons, or 13 percent. The U.S. 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 U.S. market share, said Nobuyuki Chino, president at Continental Rice Corp. The U.S. is set to supply 1.5 million tons or 56 percent of imports in the first quarter of 2013, said Chino, who has traded grains for more than three decades. Brazil will provide 800,000 tons and Argentina 150,000 tons, while Ukraine and others ship the rest.

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

Japan’s corn imports for feed, food and industrial use may drop almost 3 percent this year from 15.3 million tons 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 $8.49 a bushel on Aug. 10 and traded at $7.39 at 5:45 p.m. Singapore time today.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net.


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