COLUMN-Japan to make a late-year play for corn supplies? Maguire
By Gavin Maguire
CHICAGO Dec 3 (Reuters) - Japan, the world's top importer of corn, has been conspicuous by its absence from the U.S. market in recent months, but that may be about to change as the end of the year approaches.
U.S. exports of corn to Japan have gotten off to their slowest start to the crop year in more than a decade, after heightened competition from other suppliers such as Brazil and the Ukraine kept U.S. shipments in check. But Japan recently accelerated its imports of other crop staples, and traditionally does the same with corn purchases during December so it may be about to finally make its presence felt on the 2012-13 import stage.
In the first three months of the 2012-13 marketing year (start date: Sept. 1), U.S corn export shipments to Japan have totaled just under 2 million metric tons, compared to more than 2.7 million tons at this point in 2011 and more than 3.3 million the year before that.
Historically strong prices account for some of the softness, as Japan - much like every other nation - has shown a tendency to curtail consumption during periods of sharp price strength.
But increased dependence on corn supplies from other regions has also contributed to the slower U.S. export pace, with Brazilian corn exports to Japan rising by more than tenfold between 2007 and 2011. Ukraine exports to Japan are also up sharply in recent years.
Still, while export sales out of other regions aside from the United States were indeed quite strong earlier this year, they have dropped off in recent weeks on the back of declining inventories in those areas, potentially setting the stage for an uptick in U.S. shipments to Japan over the final weeks of the year.
The overall cost of U.S. corn continues to exceed the price tag of Brazilian and Ukrainian-sourced corn, even after accounting for the lower cost of freight from the United States than from Brazil.
But large-scale buyers are aware that it is easier to secure hefty tonnages out of the United States currently than out of Brazil. Brazilian farmers are preoccupied with wrapping up the soybean planting season and may be less inclined to sell off corn inventories than U.S. growers who have recently wrapped up harvest for the year and are sitting on fairly substantial tonnages of the grain.
As strong as Japan's corn imports from origins outside the U.S. may have been this year, the relatively low level of corn inventories residing in that country will be cause for concern for Japanese grain supply managers. According to U.S. Department of Agriculture estimates, Japan's corn stocks are hovering near their lowest level since the early 1970s, while the country's corn stocks-to-use ratio (a measure of how tight supplies are relative to projected use) is not far off its tightest level on record.
Considering the relatively low level of global corn reserves following this year's disappointing U.S. corn growing season, and Japan's strong dependence on imports for corn supplies (100 percent of the corn consumed in Japan is imported), Japan's traders responsible for ensuring adequate crop supplies will likely get increasingly nervous at the prospect of another sub-par American growing season in 2013 should the prevailing drought conditions across the Midwest persist. (U.S. drought area 2011 versus 2012:)
Consequently, a round of year-end stock building could well emerge in the coming weeks as inventories of key crop staples get replenished with a view toward ensuring adequate supplies for the opening months of 2013.
Another factor supporting expectations for an uptick in Japanese interest in U.S. corn over the coming weeks has been the seasonal tendency for U.S. corn exports to Japan to pick up notably from November levels over the final weeks of the year.
As the following graphic depicts, corn exports from the United States to Japan have consistently picked up during December from their November pace as Japanese crop procurement agents replenish reserves at year-end. (Seasonal graphic of U.S. corn exports to Japan:)
Considering the prevailing low level of corn inventories - especially relative to the level of other crop staples such as soybeans and wheat - that pattern of increased buying interest looks liable to unfold again in 2012.
So while the world's top importer of corn may well have been only a bit-part player on the corn import stage so far this year, it may well be readying itself for a more prominent finish that could see U.S. corn exports pick up pace over the final weeks of the year.
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