Japan's Post-Tsunami Wheat Demand Sustained as Grain Sought for East Coast

Wheat purchased for shipment to eastern ports in Japan, the third-largest buyer of Australian supplies, signaled exports to the country would be little affected by this month’s earthquake and tsunami, CBH Group said.

“The positive sign is they have tendered for the eastern side, where most of the damage had happened,” Tom Puddy, head of grain marketing at CBH, Australia’s largest grains shipper, said today by phone from Perth. “They have continued to import and there have been no requests to delay cargoes.”

Japan relies on imports for almost 90 percent of its milling wheat, buying mostly U.S., Canadian and Australian supplies through tenders. A 9.0-magnitude earthquake on March 11 triggered a tsunami that engulfed towns, damaged ports and caused radiation to leak from a nuclear power plant.

“I’m not expecting any major delays or spike in demand going forward,” Puddy said by phone. Hokkaido, the largest domestic wheat-producing prefecture, is away from the main region affected by the tsunami and the radiation leak, he said.

Wheat for May delivery on the Chicago Board of Trade fell 0.2 percent to $7.255 a bushel at 6:18 p.m. Melbourne time, extending a 1.4 percent slump yesterday.

Any reduced flour-milling capacity in the tsunami-hit area because of power shortages or damage would be offset by increased output by producers in other regions, Puddy said.

Production Shift

“They will increase their capacity and redistribute the end-user products to the areas that are affected by truck or rail,” he said. The damaged areas had more feed production than flour milling, he said.

Japan bought 103,125 metric tons of milling wheat from the U.S. and Australia in a March 24 tender for delivery to eastern and northern ports including Otaru, Hakodate, Kashima, Chiba, Tokyo, Yokohama and Shimizu, Masafumi Otsuka at the ministry’s grain-trade division said last week. Miyagi, Iwate and Fukushima prefectures were the worst-hit by the quake and tsunami.

Demand for wheat for noodles and livestock feed was likely to be little changed in Japan even as damage caused logistical challenges in the country, Peter Rowe, manager agribusiness projects and strategy at Bankwest in Perth said today.

“There’s going to be a short-term blip in terms of the disruption to supply chains, but none of the fundamentals change,” he said. Wheat for noodles is a staple food and it’s unlikely there will be a decline in consumption, he said.

Shipment Pace

Australia shipped 431,900 tons of wheat to Japan in the first four months of the marketing year started Oct. 1, while total exports were 5.6 million tons, according to the Australian Bureau of Agricultural & Resource Economics & Sciences. Japan is the largest grain market for Western Australia.

Farmers will start planting the next wheat crop from late April as persistent dry weather raises concerns that state output may be curbed for a second year. Drought cut production by 42 percent in Western Australia’s last harvest, according to federal government estimates.

“There’s no real rain on the radar for the next couple of weeks,” Puddy said. “Farmers are becoming a bit anxious here and the local feed market is becoming anxious about whether we will have a normal season.”

Western Australia accounted for 18 percent of national wheat production last harvest, compared with 37 percent the year before, according to Abares data.

Australia is forecast to be the fourth-largest wheat exporter in 2010-2011 after the U.S., Franceand Canada.

(Source: http://www.bloomberg.com/news/2011-03-31/wheat-purchase-by-japan-seen-positive-for-post-tsunami-demand-cbh-says.html)