Grain Demand in Japan Unlikely to Decline After Disaster, UN’s Konuma Says
Grain demand in Japan, the world’s largest corn importer, is unlikely to decline even after an earthquake and tsunami damaged some of the nation’s ports and disrupted deliveries, the United Nations said.
The country, struck by its strongest earthquake on record on March 11, faces power blackouts and the increasing danger of radiation leaks at a crippled nuclear facility. The unloading of U.S. corn from vessels at Kashima and other northern ports were suspended because of power outages, Zen-Noh, Japan’s largest corn buyer, said March 14.
“I don’t see any particular reason for demand to decline at the moment,” Hiroyuki Konuma, Asia’s regional representative at the UN’s Food & Agricultural Organization, said in a phone interview from Bangkok yesterday. “Ports in the northern part aren’t major ports. For importing foods from abroad, shipments can be redirected to other ports. Demand remains there.”
Sustained purchases by Japan may help push corn prices higher, after futures in Chicago slumped to the lowest level in almost two months yesterday. The contract for May delivery traded 0.2 percent lower at $6.3475 a bushel at 10 a.m. in Singapore. Prices have tumbled 13 percent this month.
Global supplies of corn will remain tight even if the market sees “a temporary decline” in demand from Japan, Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said in a phone interview from Sydney yesterday.
High food prices may persist in the next six months as the nuclear crisis in Japan boosts the nation’s oil needs, increasing fuel and transport costs, Konuma said.
About 4.8 million metric tons of the 24 million tons of feed Japan produces each year come from the northern region hit by the quake and the tsunami, Eri Utamaru, assistant director at the livestock production and feed division of the Ministry of Agriculture, Forestry and Fisheries, said March 14. Ports and feedmaking plants in coastal areas were damaged, she said.
About half of national feed production each year comes from corn, so the disaster may hurt 2.4 million tons of the grain on an annual basis, Utamaru said. Other feed ingredients include soybean meal, sorghum and barley.
Japan’s corn demand is estimated by the U.S. Department of Agriculture to rise to 16.1 million tons this season, from 16 million tons in the previous season.
“Production of grains shouldn’t be affected at the moment as it isn’t growing time. The weather is still cold,” FAO’s Konuma said.
Global corn inventories will drop for a third consecutive season in the year through June 2012 as record world production won’t be enough to satisfy rising demand, the International Grains Council forecast last month. Before the next harvest, inventories will be equal to 15 percent of demand, the smallest since 1974, according to USDA data.
“Once the situation does become clearer and if the worst is averted, then we think investors will continue to see agricultural commodities as an attractive investment path, at least in the medium term,” Mathews said, referring to a three to 12-month period.
Still, Mathews said the investor reaction to the disaster in Japan in the next few weeks “is going to prove a significant hurdle” to the rally in prices.
To contact the editor responsible for this story: James Poole in Singapore at email@example.com