March 6, 2008

 

Competition to rise if Japan lowers wheat protein requirements

 

 

Japan's consideration of lowering its wheat protein requirements is expected to increase competition in the market but is not expected to have much effect on Canadian wheat sales to that country, according to market participants.

 

"Essentially, what the decision does is allow alternative suppliers to meet the specifications of Japanese millers more easily, which in turn could create a bit more competition for Canada," Glenn Lennox, a wheat analyst with the Market Analysis Division of Agriculture and Agri-Food Canada said.

 

Japan currently sources most of its wheat from the US, Australia and Canada.

 

A Japanese flour miller representative Feb. 13 said the country is considering buying less costly, lower protein wheat beginning in April to curb runaway import costs.

 

As far as Canada being able to meet Japanese wheat specifications, there should be no problem, and in fact in most years there is lots of wheat under 12.5 percent protein produced, Lennox said.

 

Lennox said Japan is obviously looking to diversify its suppliers in view of the high prices that have hit wheat values in general.

 

"The most likely thing here is that it will not affect Canada's ability to supply but it will increase the competition into that market, which will have a tendency to lower values as a result," Lennox said.

 

However, he also pointed out that Japanese millers have a very high standard for quality.

 

"So how much lower quality wheat the Japanese will take and blend into the mix is the real question," Lennox said. "As a result, it was hard to pinpoint how much wheat Japan would actually source from other than their traditional outlets."

 

Maureen Fitzhenry, Canadian Wheat Board media relations manager said Japan's investigation of other types of wheat has been going on for a while and the CWB does not expect any short-term impact on Canadian exports.

 

However, she said it was still unclear whether there will be any effect in the longer term.

 

Canadian wheat shipments (excluding durum) to Japan at the end of January in the 2007-08 (Aug-Jly) crop year totalled 431,400 tonnes, according to figures from the Canadian Grain Commission.

 

This compares to 427,300 tonnes during the same months in 2006-07.

 

Sales of Canadian wheat to Japan during the entire 2006-07 season totalled 908,700 tonnes, and shipments for 2007-08 are expected to be close to 1 million tonnes also.