Radiation Driving Japan Corn Cargo to Quarter-Century Low: Freight Markets
Japan, the world’s biggest corn importer, may buy the fewest cargoes in a quarter century as concern about radiation-tainted meat curbs livestock production.
Corn shipments may drop 5 percent to 15.4 million metric tons this year, according to Nobuyuki Chino, the president of Tokyo-based Continental Rice Corp. Beef imports rose 11 percent in the first five months and may maintain that pace for the rest of the year, said Tetsuro Shimizu, chief researcher at Norinchukin Research Institute Co.
Japanese farmers are contending with their biggest crisis since an outbreak of mad-cow disease in 2001 after stores sold meat from cattle fed with hay contaminated by the crippled Fukushima Dai-Ichi nuclear plant. The surge in beef imports is an opportunity for Tyson Foods Inc. (TSN) and Minneapolis-based Cargill Inc., the biggest U.S. providers to Japan, and the shipping lines hauling supplies across the Pacific.
“I feel I had better avoid buying food from the stricken area for our children,” said Emiko Hirano, a 50-year-old mother of four living in the Chiba Prefecture east of Tokyo. “I am very angry that the government has not taken appropriate measures to ensure food safety.”
The drop in Japanese corn demand may have little impact globally, with the U.S. Department of Agriculture forecasting a 5.3 percent gain in export trade to 94.9 million tons in the 2011-2012 marketing year. China may buy as much as 5 million tons this year to replenish stockpiles, said Shawn McCambridge, a senior grain analyst at Jefferies Bache LLC in Chicago. It imported 1.6 million tons last year, customs data show.
Japan’s corn purchases in the first five months of the year fell 4.5 percent to 6.47 million tons, according to government data. Cargoes of feed corn slumped 8.2 percent to 4.05 million tons. Archer Daniels Midland Co., based in Decatur, Illinois, and Bunge Ltd. (BG) of White Plains, New York, are among companies shipping to Japan, according to Chino.
Corn prices as much as doubled in the past 12 months as global inventories declined. Farmers will fail to produce enough again this harvest, driving world stockpiles to the lowest since 2006-2007, the USDA predicts. Japan’s projected imports would be the lowest since the 1985-1986 marketing year, USDA data show.
The impact of the decline in Japanese corn demand on commodity shipping will be limited. The 800,000-ton slide forecast by Continental Rice Corp.’s Chino compares with the 3.43 billion tons of bulk commodities that Clarkson Research Services Ltd., a unit of the world’s largest shipbroker, expects to be shipped this year.
Global cargoes of wheat and coarse grain, the category that includes corn, will rise 2 percent to 252 million tons, Clarkson estimates. Grain is usually hauled to Japan on supramax vessels that can also carry coal and iron ore, said Derek Langston, a London-based analyst at Simpson, Spence & Young Ltd., a unit of the world’s second-largest shipbroker.
The cost of hiring a supramax for a single voyage fell 28 percent in the past 12 months to $13,282 a day, according to the London-based Baltic Exchange, which publishes rates for more than 50 maritime routes. The global fleet of supramaxes expanded 31 percent in a year, with orders for new vessels equal to 48 percent of existing capacity, data from Redhill, England-based IHS Fairplay show.
U.S. beef exports to Japan will probably rise 33 percent to 140,000 tons this year, Philip Seng, chief executive officer of the U.S. Meat Export Federation, said in May. Shares of Osaka- based Nippon Meat Packers Inc. (2282), Japan’s biggest meat processor, slumped 4.2 percent on July 19, when authorities banned cattle shipments from Fukushima.
The U.S. is expected to ship the most beef ever this year, according to Centennial, Colorado-based CattleFax, which has researched the industry for four decades. The surge will help generate record income of $94.7 billion this year for American farmers, the government estimates.
The cargoes, typically carried in refrigerated steel boxes, are also bolstering demand for shipping. An index for six types of container rates from the Hamburg Shipbrokers’ Association climbed 14 percent this year, extending a 132 percent advance in 2010. About 90 percent of global trade moves by sea, according to the Round Table of International Shipping Associations.
Cattle futures traded on the Chicago Mercantile Exchange increased 23 percent in the past 12 months. They reached a record $1.21625 a pound on April 4 after the disaster in Japan spurred speculation exports would accelerate.
Japanese authorities found 2,906 cattle fed with hay tainted by radioactive cesium and shipped to market, the Ministry of Agriculture, Forestry and Fisheries said today. The Fukushima Dai-Ichi nuclear plant was damaged by the magnitude-9 earthquake and 23-foot tsunami that hit Japan on March 11.
Aeon Co., the country’s biggest supermarket chain, said yesterday that beef now suspected of being contaminated was inadvertently put on sale at 174 stores across Japan.
Orders for domestic beef have declined this month, said Kohei Akiyama, a spokesman for Nippon Meat Packers. He declined to estimate the scale of the drop.
“Supermarkets are adding shelf-space for foreign beef and reducing displays of local meat as the radioactive contamination is widening,” said Susumu Harada, a senior director at the U.S. Meat Export Federation in Tokyo.
U.S. beef exports to Japan jumped 53 percent in the first five months of the year and that expansion will probably continue, said Takamichi Tawara, who runs Tyson’s Tokyo office. Japan represented 10 percent of the Springdale, Arkansas-based company’s $4.4 billion in international sales in the 2010 fiscal year, according to a report on its website.
Tyson will report a 4.4 percent drop in net income to $745.9 million in its fiscal year ending in September, according to the mean of seven analysts’ estimates compiled by Bloomberg. Shares of the company gained 5.3 percent this year, compared with a 6.6 percent advance in the Standard & Poor’s 500 Index.
“It’s the single most important thing for the profitability of a protein company right now, growing exports, because that means that margins expand,” said Timothy S. Ramey, a Lake Oswego, Oregon-based analyst at D.A. Davidson & Co., who has a “buy” rating on Tyson. “We are the best supplier of protein to the world.”
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