Japan snaps up more Canadian wheat, turns from U.S.

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Japan snapped up Canadian wheat for making bread and noodles in a surprise tender that closed on Tuesday, ramping up purchases from the North American nation as its prices fall on bumper harvests.

Increased buying from Canada by the world's sixth-largest importer of the grain is usurping appetite for wheat of similar quality from the United States.

Canada has been going head-to-head against the U.S. after producing a record wheat crop this year filled with lower-than-usual protein levels, making its prices attractive.

"This entire month has been like a festival with all the (Canadian) buying going on," said a grains trader in Tokyo, referring to the latest tender and purchases at regular tenders.

Japan's Ministry of Agriculture bought a total of 111,173 tonnes of Canadian Western Red Spring wheat in the special tender on Tuesday, adding to the nation's stocks amid a shift away from pricier U.S. Dark Northern Spring.

Japan farm ministry purchases of Western Red Spring rose almost 40 percent in April-November from the same period a year ago to 899,810 tonnes, while orders for Dark Northern Spring were down a third at 594,144 tonnes. Japan's fiscal year starts in April.

Over the same period, the average price Japan paid for Western Red Spring at 35,757 yen ($350) per tonne was almost 2,000 yen cheaper than Dark Northern Spring, according to Reuters calculations based on the ministry data.  

Japan typically buys five grades of food-quality wheat from Australia, Canada and the U.S., including the Western Red Spring and Dark Northern Spring varieties, via tenders usually issued three times a month that close on Thursdays.

Tokyo controls imports of wheat, its second most important grain after rice, to protect domestic farmers and insulate consumers from volatile markets.

Heavy Snow

Tuesday's extraordinary tender for the Canadian grade was issued to offset any delays caused by a possible increase in activity at Canadian ports due to its record harvest or by winter weather, a farm ministry official said last week.

Canada's monster crop levels have highlighted a logjam of moving grains and oilseeds from country elevators to ports by rail, just as Western Canada received heavy snow and frigid temperatures last week.

The tender was for less than the total of 162,011 tonnes via six cargoes that was originally targeted, however. The farm ministry official said on Tuesday that he was looking into why they were unable to fill the whole tender, which was several times bigger than the 20,000-30,000 tonnes typically bought in the mostly weekly regular tenders.

Traders said the logistical problems in Canada may have been behind this.

"Although Canada had a bumper harvest, its export ability is maxing out, so the (price) gap should eventually narrow further as logistics get more expensive," said one Tokyo grains trader.

Japan has boosted its purchases of Western Red Spring around this time in past years to create ample stockpiles in case shipments across the Pacific Ocean were delayed in the past, but never at such a level, the trader said.

The government official said last week that the surprise tender did not mark a change in Japan's wheat buying procedures.

The supplementary tender for the Canadian grade added to the four cargoes the agriculture ministry took last week in its regular milling wheat tender, more than the one or two they normally buy.

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