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Bunge, Marubeni May Need Japanese Corn Buyers to Offset Iranian Sanctions Risk

Ags - Grains/Beans 282 Brazil 378 Consumer Staples 734 Japan 570 U.S. 5197

Japanese corn buyers may need to increase their sourcing from the U.S. or Argentina after an absence of delivery offers from Brazil for early 2020, S&P Global Platts reports. 

While the opportunity to increase sales to Japan may act as a hedge for U.S. farmers beset by tariff-driven reductions in sales to China – as outlined in Panjiva’s research of Nov. 20 – those sales which may not arrive if the phase 1 talks don’t result in a successful conclusion.

Meeting the increased Japanese demand may prove to be a challenge for U.S. farmers anyway given delays in completing the harvest as well as quality problems given poor weather conditions over the summer.

Panjiva data shows U.S. exports of corn fell by 57.6% year over year in 3Q, while shipments to Japan – led by exporters including Scoular – dropped by 64.9%. That included the worst performance for a single month since Nov. 2015 in September. In a longer-term context exports in total fell 23.5% year over year in the 12 months to Sept. 30, while exports to Japan fell by 10.5%.

CORN EXPORTS SHIPPED EARLIER, BUT IN LOWER QUANTITIES TO JAPAN

Chart segments U.S. exports of corn by destination on a monthly and 12-month average basis.  Source: Panjiva

By contrast, Brazilian exports surged 97.6% higher year over year in 3Q during what is normally the peak season for suppliers. Japanese purchases were already significant buyers, and shipped earlier than normal resulting in Japan representing 14.9% of the total in 3Q from a negligible level a year earlier.

While fewer shipments have been offered so far, Brazillian exporters may need to find new buyers given it will be increasingly difficult to export to Iran, which represented 14.5% of the total and may be subject to U.S. sanctions.

Potential beneficiaries of a rotation back to Japan are led by Bunge, which represented 17.3% of total Brazillian exports in the 12 months to Sept. 30 after a 60.8% year over year surge in exports in 3Q. Others include Marubeni, which represented 5.7% of the total after a 55.7% surge, and Olam which dropped to 3.6% of the total after a 47.7% drop in shipments.

EXPORTS TO JAPAN SURGE AS IRAN-BOUND CORN SLIPS

Chart segments Brazilian exports of corn by destination on a monthly and three-month average basis.  Source: Panjiva

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