Corn buyers in Japan are set to further increase purchases from Brazil and Ukraine, lured by prices that are about $10 a metric ton cheaper than U.S. supplies, according to traders including Continental Rice Corp.
Imports from the U.S. may drop 20 percent next quarter amid slowing Japanese demand, putting a drag on futures on the Chicago Board of Trade, Nobuyuki Chino, the president of the Tokyo-based grain trader, said Friday in an interview. Purchases from Brazil, Ukraine and other non-U.S. exporters will expand about 20 percent from about 1.5 million tons in the current quarter, he said.
“U.S. shippers have difficulty finding enough buyers overseas as their corn is the priciest in the international market," said Kazuhiko Saito, chief analyst at Fujitomi Co., a commodity broker in Tokyo. “Corn below $4 a bushel is said to be cheaper than production costs for most U.S. farmers, but even if they withhold sales, that would expand opportunities for other countries to boost exports."
South American and European suppliers are offering corn to Japan about $10 a ton less than the U.S., the largest exporter, as their currencies tumbled against the dollar, according to Chino, who has traded grains for almost four decades. The differential amounts to about 25 cents a bushel of corn.
Corn futures for December delivery dropped 2.4 percent last week to $3.732 on the Chicago Board of Trade. Prices have fallen 6.1 percent this year, heading for a third straight year of losses.
Japan’s corn imports fell 4.3 percent to 9.7 million tons in the eight months through Aug. 31, according to data compiled by the Agriculture Ministry. Imports this year are likely to be the least since at least 1986 as livestock production and demand for feed declines, Chino said.
Imports from the U.S. amounted to 8.37 million tons in the eight months, or 86 percent of the total, according to the ministry data. Purchases from Brazil were 877,605 tons, with shipments from Ukraine at 336,427 tons.
The swing to Brazilian grains began after Chicago futures rallied to a one-year high in July amid concerns about wet weather, and accelerated as the Brazilian real tumbled to a record low against the dollar in September, making the nation’s produce more competitive in the global market.
Overall corn demand is shrinking in Japan as high feed costs are forcing inefficient farmers to quit production, leading to a drop in cattle herd, Saito said. The government’s policy of promoting local rice as livestock feed has also weakened demand for imported corn.