As the tsunami traveled across the Pacific, the largest wave heights occurred near Japan. The wave then decreased in height as it traveled across the Pacific but grew taller as it neared coastal areas.
In the aftermath of the devastating magnitude 9 earthquake and resulting tsunami that ravaged much of northern Japan, the commodity trade world is working around the clock to assess the impact this disaster has had on the country and the meat trade.
Much of the U.S. beef and pork that goes to Japan is delivered to ports from Tokyo southward. Early reports are that most of those ports were not heavily damaged, according to the U.S. Meat Export Federation. Refrigeration is a consideration in maintaining the cold chain, but reports indicate that the power grid is operational in many areas, especially ports, and power will be rerouted to areas in need.
Transportation is another issue. For now, key highways are being reserved for emergency vehicles, so product distribution in northeast coastal areas will be a challenge, but there already are signs that companies are regaining limited access to roads for distribution.
The Tohoku region in the northeast part of Honshu, Japan’s largest island, was the hardest hit by the disaster. Several meat processing plants are out of service. Rolling blackouts will pose a continuing challenge for the near term.
The same issues that are affecting homeowners and manufacturers are affecting retailers in the Tohoku region: power blackouts are forcing retailers to manage their order systems manually, and a lack of gasoline is affecting product distribution and the movement of consumers.
Long-Term Demand. The major population centers of Japan have been affected to a lesser degree compared with Tohoku, which represents 1.6% of Japan’s population and less than 2% of its gross domestic product. It is far too early to speculate about the long-term impact of this disaster on Japan’s overall economy, but even in recent economic times that were considered sluggish, Japan has remained a robust market for U.S. beef and pork. —Jeanne Bernick
Soybean Oil Exports Buoyed by China
Exports of soybean oil from the U.S. for 2010/11 are forecast to be 200 million pounds higher in March than the previous month, or 3 billion pounds, following this past year’s record of 3.4 billion pounds. Much of the support comes from China. This past fall, U.S. suppliers picked up many of China’s soybean oil imports when that country temporarily stopped trade with Argentina. Not since 1998/99 (prior to a major expansion of China’s crush capacity) have U.S. exports of soybean oil to China been so large. Through January, 34% of all U.S. exports of soybean oil in 2010/11 were to China.
Currently, total outstanding sales are almost as high as a year ago, although the large sales to China in the last quarter of 2009/10 are unlikely to be repeated this year.
Another reason for the strength in U.S. exports of soybean oil is that palm oil prices have increased. In recent months, slowing output of palm oil in Malaysia and Indonesia has restricted the availability of exports. Thus, palm oil prices have rallied to a record high that is 65% above a year ago. —Jeanne Bernick
Alfalfa Hay Prices Soar
Driven by limited carryover supplies and renewed demand from California dairies, alfalfa hay is soaring to new price levels and this year’s crop could reach its second-highest prices ever, says Seth Hoyt, whose hay market analyses and insights are widely followed.
"I’m bullish on hay prices because of the lower acreage we’re going to see in the West, the small carryover from 2010 into 2011 and the outlook for stronger milk prices in the $17.50 to $18 per cwt. range in the next few months," he says.
Hoyt projects that alfalfa hay from the Imperial Valley, a major alfalfa-producing area in Southern California, will be $190 to $200 per ton for the first cutting, which began in February. In California’s Central Valley, where alfalfa growers will harvest their first cutting in early April, Hoyt predicts prices of $220 to $230 per ton fob.
In Utah, another major hay production area, Hoyt foresees first-cutting prices of $170 to $180 per ton, and in Idaho and Washington, $180 to $200 per ton.
"We haven’t seen those kinds of prices since 2008," he says. Overall, alfalfa hay has risen by $50 per ton since November 2010, he adds.
High prices will help corn displace alfalfa acreage in 2011. Hoyt forecasts alfalfa acreage will decrease 10% to 15% in Washington and Idaho and 5% in California, Utah and Arizona. He expects Nevada’s alfalfa acreage to be unchanged. —Catherine Merlo
Record Soybean Crop in Brazil
Brazil’s 2010/11 soybean production estimate was increased by 1.5 million tons to 70 million, which would eclipse its record crop of 69 million tons in 2009/10. The increase was based on higher yield prospects. Nearly all regions bene-fited this season from an absence of prolonged dry periods.
This year’s larger soybean supply will reinvigorate Brazil’s processing sector. Soybean crushing for 2010/11 is expected to increase to a record 35.3 million tons, up from 33.7 million tons in 2009/10. Record domestic use of soybean meal will prevent 2010/11 exports from rising to an all-time high, although trade might improve to 13.85 million tons from 13 million this past year. Similarly, the big crop will benefit Brazil’s soybean exports, which are expected to be 200,000 tons higher in March at a record 32.5 million. —Jeanne Bernick
- Spring 2011