How Will Japanese Havoc Affect U.S. Trade?


The following article is from Dow Jones:

The location of Japan’s devastating earthquake and tsunami is likely to limit the impact on trade of U.S. agricultural commodities, though export groups say they still don’t have a clear assessment of infrastructure damage.

Japan is the biggest customer for U.S. corn and pork exports, as well as a key consumer of soybeans and wheat. The disaster is expected to have initial impacts on the flow of goods into the country, yet the prolonged impact will hinge on the health of ports in central and southern areas and how widespread destruction is throughout the country. The massive earthquake Friday hit northeast sections of Japan the hardest.

The disaster may have cut Japan’s grain-warehousing capability by 15 percent to 20 percent, which could curb imports as the country has fewer places to store grains, according to AgResource Co., a Chicago advisory firm.

The firm estimates the damage to storage could trim Japan’s near-term corn imports by 500,000 to 1 million metric tons. The country accounts for nearly 30 percent of U.S. corn exports, bringing in 15.4 million metric tons in the most recent crop year. The U.S. Grains Council said Friday that the disaster “could be of significance” to the grain trade.

Yet a bulk of the damage appears to be at ports located in northern parts of the country, which are too small to handle U.S. ships, while larger ports in southern areas could be up and running in the next week, wrote Morgan Stanley analyst Hussein Allidina in a note to clients Monday.

“If this turns out to be the case, we expect no impact to trade flows,” Allidina said.

Feed-processing facilities have also been damaged, analysts said, which could disrupt imports as well. But the facilities are mostly located in the central part of the country, which wasn’t hit as hard, said Parr Rosson, an agricultural economist at Texas A&M University.

Rosson said the overall impact will depend on how many people have been displaced or killed. He added that with damage limited in major cities, long-term demand for agricultural commodities might not be significantly hurt.

The U.S. Meat Export Federation won’t make any revisions to its export forecasts until the trade group receives “factual information about the actual impact on factors such as consumer demand, Japan’s national economy and domestic production and inventories,” a federation spokesman wrote in an email.

Tyson Foods Inc., which exports beef, chicken and pork, was “not currently aware of any disruption to our exports to Japan,” a spokesman said in an email.

Japan is the top international customer for U.S. pork in terms of sales dollars, accounting for nearly $1.646 billion in 2010, over 34 percent of U.S. total pork exports, according to data from the U.S. Department of Agriculture and U.S. Meat Export Federation.

The disaster could have more direct impact on the rice market. Morgan Stanley noted that the tsunami appeared to hit Japan’s rice-growing areas hard. Rice futures at the Chicago Board of Trade were up 3.5 percent in Monday’s trading.

As for other commodities, futures for corn, soybeans and wheat climbed slightly higher in recent trading, while hog futures continued to s

Source:  Dow Jones

Posted by Haylie Shipp


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