The fallout from Japan's earthquake will batter Canadian farmers as it reverberates through agriculture markets, although the impact is likely to be short term.
Japan is a major customer for many crops including corn, soybean and wheat. The country ranks among the top five customers for the Canadian Wheat Board, the global marketer for wheat grown in Western Canada.
"Sometimes they are our largest-volume export customer," said Maureen Fitzhenry, a Wheat Board spokeswoman. "Last year, they were third." Ms. Fitzhenry added that Japan is a particularly lucrative market for Canadian farmers because Japanese buyers demand the highest quality wheat "for which we ask a premium price."
Friday's earthquake damaged some of Japan's ports, feed mills and meat processing facilities. That prompted some analysts to speculate the country would reduce imports, at least in the short term. Ms. Fitzhenry said the CWB expects some short-term delays in shipments but added "we do not anticipate reduced overall exports to Japan, as they need to eat, and rely on shipments of top-quality Canadian grain."
Some analysts have estimated Japan's corn and soybean imports could fall up to 8 per cent. That would hit U.S. farmers especially hard.
The U.S. farm sector centres around corn and soybeans. The country is the world's largest corn producer and the crop is the most valuable grown in the U.S., worth an estimated $66-billion (U.S.) in total. Soybeans are second at about $39-billion, followed by wheat at $12-billion. Japan is the biggest buyer of U.S. corn and among the largest buyers of soybeans and wheat.
Futures for all three fell just over 1 per cent Monday morning on the Chicago Board of Trade, continuing a trend that had been under way before the earthquake. Prices for several agricultural commodities have been falling in recent weeks because of instability in North Africa and reports of big harvests in Brazil and elsewhere.
However, by Monday afternoon prices began to rebound on news that Japan's agriculture ministry had asked an industry group called the Feed Supply Stabilization Organization to release stockpiles of feed grains. That led to speculation Japan might start buying to replenish those stockpiles. All three commodities regained earlier losses and closed higher.
Despite the recent price swings, supplies for many agricultural commodities remain tight. Corn in particular is in short supply despite an expected near-record crop this year. That's because ethanol producers will consume as much as 40 per cent of the U.S. crop, a record high.