Japan Seeking U.S. Wheat, Corn for Feed Use After Russian Exports Banned

Japan, Asia’s second-largest wheat buyer, is seeking U.S. supplies for livestock feed after Russia halted exports because of the worst drought in at least 50 years.

The country buys Russian wheat and barley for feed makers, and imports milling wheat for bread and cookies exclusively from the U.S., Canada and Australia, Shirara Shiokawa, director at the grain trade division of the Ministry of Agriculture, Forestry and Fisheries, said today.

Wheat futures in Chicago jumped to a two-year high after Russia, the third-biggest grower, banned exports of the grain as well as barley from Aug. 15 to Dec. 31. This will boost demand for grains from the U.S., the biggest exporter, as Canada and Europe also brace for reduced production because of adverse weather, said Charlie Utsunomiya, director at the Tokyo office of U.S. Wheat Associates.

“Asian buyers have already started switching from Russian to U.S. grains,” Utsunomiya said today by phone. “The U.S. is the last reliable source of supply in case of emergency.”

Japan imported 58,197 metric tons of feed barley from Russia last year, or 4.2 percent of its total purchases, according to data from the Ministry of Finance. Japan also imported 1,463 tons of Russian feed wheat in 2009, less than 1 percent of total purchases.

Impact Limited

Russia’s export ban will have a limited impact on Japan as its volume of shipments was far smaller than supplies from other countries, Utsunomiya said. The Asian country imported 10.6 million tons of corn for feed use from the U.S. last year, or 96 percent of its total purchases.

Wheat for December delivery rose as much as 6.5 percent to $8.68 a bushel on the Chicago Board of Trade, taking gains to 25 percent this week. It extended a rally on speculation that other countries may follow Russia’s export ban.

Russian Prime Minister Vladimir Putin said yesterday that the ban is “appropriate” to contain domestic prices that gained 19 percent last week, after drought and record heat forced the government to declare a state of emergency in 28 crop-producing regions. He proposed that Kazakhstan and Belarus, Russia’s partners in a customs union, join the ban.

Japan will “carefully watch the movements” of the grain market, Chief Cabinet Secretary Yoshito Sengoku told reporters today. The government controls overseas purchases and domestic sales of wheat to stabilize supplies.

The agriculture ministry holds import tenders regularly for milling wheat to be sold to Japan’s 96 flour millers. It will make purchases “with due consideration” to the market conditions, Shiokawa at the grain trade division said.

The ministry canceled plans to purchase 70,000 tons of U.S. milling wheat on Feb. 27, 2008, when Chicago wheat futures surged to a record $13.495 a bushel.

Yesterday it bought 124,469 tons of U.S. milling wheat in a regular tender, the lowest amount in five months.

The smaller purchase may be a reaction from some of the Japanese millers to soaring prices, or a reflection of weaker demand at home, Masaaki Kadota, executive director at Japan’s Flour Millers Association, said by phone yesterday.

To contact the reporter on this story: Aya Takada in Tokyo at atakada2@bloomberg.net Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net.

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