Japan, the biggest corn buyer, may increase grain imports to guarantee food supplies after the nation’s strongest earthquake on record and a tsunami devastated the northeast coastal region, said Standard Chartered Plc.
“For corn, it’s a bullish event,” said Abah Ofon, a Singapore-based analyst, in a phone interview today. Signs of increased demand may bolster grain prices, he said.
Corn, wheat, soybean and rice futures tumbled on Friday after Japan was struck by a 8.9-magnitude temblor and a tsunami engulfed towns on the northern coast. The government was checking ports and grain depots for damage, the Ministry of Agriculture, Forestry and Fisheries said on March 11. Farmland was flooded with burning debris in some areas as the tidal surge swept inland, images from state broadcaster NHK showed.
“It’s just an additional uncertainty in an already uncertain market,” said Abdolreza Abbassian, a senior economist at the Rome-based United Nations Food & Agriculture Organization. “The question is not so much supplies, but distribution,” he said in a phone interview today.
The country was also grappling with its worst nuclear accident in at least 33 years at a plant north of Tokyo damaged by the temblor as local media said the death toll may top 10,000.
Radiation levels around the Tokyo Electric Power Co. station in Fukushima, 135 miles north of the capital, rose after cooling systems at a second reactor failed, heightening concerns about a possible meltdown following an explosion yesterday. Water levels fell at a third reactor, raising the possibility of a hydrogen explosion, Japan’s top government spokesman said.
In Tokyo, residents emptied supermarket shelves and steeled themselves for power outages that Prime Minister Naoto Kan said will start tomorrow. Hoarding is a natural consumer reaction in the face of calamity, said Ofon.
The quake “will likely impact grain trade” after ports in Kushiro, Hachinohe, Ishinomaki and Kashima were hit by the tsunami, and some feed mills and livestock operations were hurt, the U.S. Grains Council said March 11. Japan is the largest buyer of U.S. corn and the second biggest for wheat and rice.
Corn futures for May delivery fell 18.5 cents, or 2.7 percent, to settle at $6.6425 a bushel on the Chicago Board of Trade. Earlier, the price touched $6.5275, the lowest level for a most-active contract since Jan. 31. This week, the grain slumped 8.8 percent, the most since mid-November.
The earthquake is unlikely to cause significant damage to Japan’s feed and food production, said Nobuyuki Chino, the president of Tokyo-based Unipac Grain Ltd.
There are no large-scale facilities to produce livestock feed and wheat flour in Miyagi, which was hardest hit by the temblor, said Chino, who has traded grain for three decades. Factories in the region are supplied with grain unloaded at five or six local ports that are too small to accept Panamax-size vessels, he said in a telephone interview.
Japan imported 14.343 million tons of U.S. corn last year, almost twice as much as Mexico, the second-biggest buyer, government data show. The country’s U.S. wheat purchases were 3.148 million tons, trailing only Nigeria’s. The U.S. shipped 2.347 million tons of soybeans and 388,900 tons of rice to Japan last year, according to the USDA.
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