Japan's appetite for U.S. corn seen bouncing back

By Risa Maeda

TOKYO, April 24 (Reuters) - Japan's appetite for U.S. corn is expected to rebound this year on concerns about limited availability from China and South America, but a slowdown in demand from the poultry sector will limit growth.

The world's biggest corn importer, which annually buys about 12 million tonnes of the grain for feed, bought 11.2 million tonnes from the United States in 2007, down 7 percent. In contrast, imports from China doubled to 557,000 tonnes and those from Argentine rose almost four times to 279,000 tonnes.

But a farmers' strike and uncertain loading schedules in Argentina, coupled with Beijing's aim to discourage grain exports, are ringing alarm bells for Japanese buyers who are shying away from taking a risk and signing import contracts from those origins.

"A switch back to the United States is highly likely as last year's somewhat frenzied buying of cheaper grains from Argentina and China will not be repeated," said Nobuyuki Chino, president of Tokyo-based trading firm Unipac Grain.

Traders said imports of U.S. corn could grow 5 percent this year despite a rally in Chicago futures to a record above $6 per bushel CK8, up more than 60 percent from a year earlier.

Japan depends entirely on corn imports as domestic supplies of the grain, the main component of feed in Japan, is negligible.

In addition to soaring prices of corn, imports of other grains, which can be used as an alternative to corn, such as rice, wheat or sorghum, are as expensive as corn.

Feed makers are expected to seek alternative feed ingredients to U.S. corn only if the price rises to around $8 per bushel, a general manager at a Tokyo-based trading firm said, quoting an estimate by a major Japanese compound feed maker.

"Japan's preference for U.S. corn will otherwise remain the same," said the general manager, who declined to be identified.

SLOWER GROWTH

But the switch back to U.S. corn would not mean a double-digit rebound in imports from the world's biggest corn producer as a slump in the domestic livestock industry, in particular egg farms, has curbed demand for compound feed.

Egg farms account for the biggest share of 30 percent of Japan's total compound feed production.

Soaring costs of farm commodities has prompted a series of price hikes of food produce in Japan, starting last year. But the egg-laying industry has not been able to pass on the higher input costs to consumers because of oversupply in the market.

Encouraged by subsidies from an industry fund to absorb sudden rises in prices of compound feed, livestock farmers in the past two years fed far more hens for eggs to expand market share, resulting in surplus output.

"The situation for the egg-laying industry is tough across the nation," said Youhei Nishida, manager at the feed division of Nosan Corp (2051.T), adding that he expected a 3 to 4 percent fall in demand from the sector.

But Kiyoshi Yamashiro, head of Nippon Formula Feed Manufacturing Co's (2056.T) livestock feed division, said buoyant demand from the cattle and hogs industry would offset the slowdown in demand from the poultry sector to some extent. ($1=102.40 yen) (Editing by Sambit Mohanty and Ben Tan)