Mitsui new grain player

Japanese trading house Mitsui has signalled its entry into the WA grain market, teaming up with pool manager Plum Grove to offer a WA noodle pool.

Other major Japanese power houses Sumitomo, which took a 50 per cent equity share in Emerald in March 2010, and Mitsubishi, the parent company of Riverina, have already moved into the WA grain space.

This latest play by Mitsui, which has shareholdings in the second and third biggest flour millers in Japan, comes as the Japanese Government continues on its path of deregulating controls over food imports.

Plum Grove managing director Andrew Young said from a WA grain industry participation perspective, the move could be described as them dipping their toe in the water with obvious intent to expand.

He said the new noodle pool offered WA growers a direct link to the Japanese and Korean noodle markets.

"The aim will be to provide pool participants with clear access to market with a foundation buyer, allowing the pool to aim for maximum value for the grain but with the comfort of Mitsui's backing," he said.

"We believe there are significant synergies for WA growers through this agreement and product offering. For growers, we believe the benefits are increased competitiveness for their grain, and for the mills overseas, more direct access to the grain, increasing food security."

Mr Young said it was a commercial relationship with Mitsui but did not extend to them taking an equity position in Plum Grove.

Japan and Korea traditionally import about a million tonnes of WA wheat for the udon noodle market a year. Last year, this figure dropped to around 400,000 tonnes and prices surged above $500 a tonne.

The blend ratio used was also lowered. It is usually a 60:40 noodle to APW2 ratio but last year the noodle content was dropped to 30:70 noodle to APW2.

Mr Young said given the increase in noodle production in WA this year, it was highly likely the Japanese and Korean buyers would approve a shift back to use higher noodle content.

The price for new crop noodle grade has also come back from its highs of last year to around $315-$320 a tonne FOB.

The Plum Grove/Mitsui noodle pool, which opens on November 14, is taking ANW1 and ANW2 grades. It is only for the Japanese and Korean markets and the pool will run until September 2012

Aiming to attract about 100,000 tonnes, the pool will also offer all the traditional payment methods available for growers, including distributions, loans and advances.