March 15, 2011
Japan quake wrecks feed manufacturing plants
Northern Japan''s animal feed processing facilities, which accounts for 17% of the country''s annual output, have been destroyed by Friday''s (Mar 11) earthquake, although grain import cargoes remain mostly unaffected.
Japan, the world''s third largest consumer of commodities and top grain buyer, is battling to avert a nuclear catastrophe in its worst crisis since World War Two after the earthquake, which is feared to have killed more than 10,000 people.
"It''s possible that the entire feed production in the area may be halted. The compound feed making facilities are located by the sea and these factories have been destroyed by the tsunami," one industry source said.
The quake-hit Tohoku region in northern Japan produces about 350,000 tonnes of compound feed per month, and the facilities for making feed in the region are almost all destroyed by the quake.
In addition, the Kashima area in nearby Ibaraki Prefecture, which produces about 350,000 tonnes of feed per month, has also suffered damages.
Japan is the world''s biggest importer of corn and third largest buyer of soybeans, the main ingredients in animal feed. It is also the world''s fourth-biggest wheat importer, and plans to buy 4.96 million tonnes of milling wheat in the year to March 31.
US grains and oilseed futures, which have been weighed down because of economic uncertainty arising out of Middle East unrest, are likely to come under additional pressure, analysts said.
"Last year Japan took 15 million tonnes of corn from the US. From the fundamentals side it''s an issue for US corn. It is bearish in the market in the short term but the question is: for how long the infrastructure is going to remain down?" said Brett Cooper, senior manager of markets at FCStone Australia.
On Monday, US soy futures fell around half a percent and corn also slipped as the nuclear accident at earthquake-damaged reactors unnerved commodity investors, and worries about supply eased.
Another source said it will mainly be the chicken farms that will be affected in northern Japan. "The damage to feed making facilities in the northern Japan hit by the quake will have the most impact to chicken farms," Cooper said.
Feed makers in other parts of the country were also likely to be affected by infrastructure disruptions, including electricity supplies, which will severely undermine operations.
"They are talking about rolling blackouts, it has cut down electricity supply. It will be a while before things get close to normal," said John Lindblom, east Asia regional director of ASA International Marketing in Singapore.
Still, no major disruptions were expected for grain shipments to Japan at this time following the earthquake and tsunami, industry sources said.
"Of Japan''s some dozen major ports where bulk carriers or tankers can dock, only two are damaged. Imports of grains to Japan therefore are not affected," said Nobuyuki Chino, president of Unipac Grain.
A Japanese trader confirmed that no cargoes bound for Japan have been diverted or canceled as yet.