CBOT corn outlook: Down on concerns of slowed Japan demand

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U.S. corn futures are expected to start lower Monday on projections Japan will slow grain imports as it recovers from devastating natural disasters.

Traders and analysts predict corn for May delivery will start down 5 to 7 cents a bushel at the Chicago Board of Trade. In overnight electronic trading, the contract dropped 4 3/4 cents, or 0.7%, at $6.59 1/2 a bushel.

Futures are feeling pressure from concerns Japan, the world's top corn importer, will reduce grain purchases after last week's massive earthquake and tsunami damaged ports and storage facilities. Trading executives in Asia estimate Japan's monthly imports of feed corn may fall by up to 8% after the earthquake hit operations of several feed manufacturers.

"Now that port facilities and other infrastructure in Japan have been destroyed, it will be difficult to unload and transport imports in the foreseeable future," Commerzbank said in a note.

Corn futures have pulled back 11% since reaching a 32-month high this month on concerns about tight supplies. The disasters in Japan add to concerns about reduced consumption after rallying energy prices last week raised worries about a slowdown in global demand for commodities.

The disasters may have reduced Japan's grain-warehousing ability 15% to 20%, which could trim the country's nearby corn imports by 500,000 metric tons to 1 million metric tons, according to AgResource Co., a Chicago agricultural consultancy. Japan is projected to import 16.1 million tons of corn in the marketing year that ends Aug. 31, 17% of total global imports.

Interior transportation networks are "snarled," AgResource added in a note to clients. The firm said it's difficult to move feed to poultry and hog farms in northeastern Japan.

Shipments of grain to Japan may be delayed as ports in the north--including Sendai, Hachinohe and Kamaishi--were damaged, along with inland transportation networks. Traders predicted it will take several weeks to restore the grain transportation network to normalcy.

The ports damaged by the tsunami handle 17% of Japan's compound-feed needs and are directly linked to poultry operations in the area, according to brokerage firm FCStone. The firm told clients that damage to poultry farms was likely "minimal" but that damaged feed mills will take months to repair.

Southern ports--such as Tokyo, Yokohama, Osaka and Hiroshima-may see more shipments due to problems in the north, and distribution within Japan could be arranged from those locations, said Subhangshu Dutt, chairman, Institute of Chartered Shipbrokers. Delivery of imported grains is spread throughout Japan due to high costs of internal transportation.

Sameer Mohindru in Singapore contributed to this article.



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