Japan, the world’s biggest corn buyer, will cut its imports of the grain as it relies more on home-grown rice for animal feed.
Purchases may drop about 3 percent this year from 15 million tons last year, nearing a 27-year low reached in 2013, Nobuyuki Chino, the president of Tokyo-based Continental Rice Corp., said in an interview on Thursday.
Slowing Japanese demand may weigh on the benchmark price in Chicago, which is extending a third annual decline amid forecasts for ample global harvests. Japan’s feed-rice output is rising to a record as the government subsidizes planting to ease oversupply of food rice and to reduce the country’s dependency on imports for grain supply.
“Rice is emerging as a major competitor to corn in the choice of feed grains by Japanese,” said Tetsuo Hamamoto, director at the U.S. Grains Council’s Tokyo office. “Competition may become more intense as costs to purchase corn increase.”
Japan’s currency tumbled to a 12-year low of 125.05 per dollar on June 2, boosting costs to import everything from corn to wheat and soybeans for a nation that relies on foreign supplies for almost 60 percent of its food.
Corn, used in food, feed and biofuels, is down 9.8 percent this year in Chicago after falling the previous two years. The contract for July delivery on the Chicago Board of Trade fell 0.2 percent to $3.5825 a bushel at 1:28 p.m. in Tokyo. Prices tumbled 58 percent from a record $8.49 reached in August 2012.
Japan began a rice-for-feed campaign in 2008, when drought and rising use of corn for ethanol production sent Chicago prices to a record high. The country has set a target to produce 1.1 million tons of feed rice for the year through March 2026, a 10-fold gain from the fiscal year ended March 31, 2014.
“Demand for rice as an alternative to corn is increasing from local feed mills,” said Toyohiko Kawai, director at the cereal-crop division of the Agriculture Ministry. “We expect them to replace almost half of their corn with rice.”
The government pays as much as 105,000 yen ($843) of subsidy to local farmers for every 10 ares (0.25 acres) of feed-rice planting. Feed-rice output will double to 350,000 tons this year, the agriculture ministry estimates.
The ministry increased rice sales from state reserves to the livestock industry by 62 percent to 791,594 tons last fiscal year to March 31, helping erode corn demand, said Continental’s Chino who has traded grains for almost four decades.
Last year, Japan imported 15 million tons of corn, of which 9.66 million tons were for feed, according to the ministry. The U.S. supplied 84 percent of the imports, with 8 percent from Brazil and 6 percent from Ukraine.