(Updates with comment from executive in eighth paragraph.)
Feb. 6 (Bloomberg) -- Japan, Asia’s second-largest wheat buyer, will increase imports from the U.S. after shipments from Canada arrived late for a second month.
The Ministry of Agriculture, Forestry and Fisheries in Tokyo bought 46,849 metric tons of U.S. hard wheat in a tender today as an alternative to Canadian supply, Sunao Orihara, a director of grain trading, said in an interview.
Increased purchases by Japan may support wheat futures in Chicago, said Nobuyuki Chino, who has traded grains for more than three decades and is the president of Continental Rice Corp. in Tokyo. Japan’s wheat reserves only meet 2.3 months of consumption by flour millers and deliveries from Canada failed to meet December and January deadlines.
“The situation will probably get worse as rail transportation in Canada is often disrupted from February to March by heavy snow and avalanches,” said Chino. “Japan will have to depend more on U.S. wheat as the supply bottlenecks in Canada won’t be resolved anytime soon.”
Japan bought 2.9 million tons of milling wheat from the U.S. in the year ended March 31, accounting for 58 percent of its imports of the grain, data from the ministry shows. Canada was the second biggest supplier to Japan, with 1.2 million tons.
Global benchmark wheat futures in Chicago dropped 24 percent over the past 12 months. Hard-wheat futures for March delivery on the Minneapolis Grain Exchange jumped as much as 2.3 percent today.
A record grain harvest in Canada last year has coincided with rising demand for the nation’s thermal coal and liquefied natural gas from Japanese customers, worsening congestion from railways to ports, Chino said.
“This is our worst fears realized,” said Wade Sobkowich, executive director of the Winnipeg-based Western Grain Elevator Association, which represents grain-handlers including Cargill Ltd. and Glencore Xstrata Plc’s Viterra unit. “We don’t want to lose sales because our customers don’t have confidence in our ability to deliver.”
There is about 4.6 million metric tons of grain stuck on Canadian Prairies due to an inadequate supply of rail cars to move the crop to export, Sobkowich said. There are more than 51,000 grain-car orders that have not been filled by railways, he said.
Japan’s agriculture ministry controls overseas purchases and domestic sales of wheat to stabilize supply.
It bought 18,360 tons of hard-red winter wheat and 28,489 tons of dark-northern spring wheat from the U.S. in a tender today for shipments from February to March as alternatives to western-red spring wheat from Canada, which is used for bread- making in Japan, according to Orihara.
The purchases were part of a total of 284,161 tons of milling wheat Japan bought in import tenders today.
The lack of supply from Canada has increased wheat import costs for Japan, which depends on overseas shipments for almost 90 percent of its needs, according to Orihara.
The agriculture ministry paid 42,234 yen ($416) a ton on average for Canadian wheat in tenders in January, compared with 36,086 yen a year earlier.
--Editors: Joe Richter, Bob Brennan