Market Matters Blog

Japan announced this morning its suspending white wheat and feed wheat imports from the U.S. after USDA officials announced the presence of genetically engineered wheat in an Oregon field. Those two classes of wheat make up roughly one third of the wheat Japan buys from the U.S., Dow Jones Newswires reported this morning. White wheat accounts for 17% of total U.S. wheat exports.

The suspension doesn't affect contracts for U.S. western white wheat that have already been arranged for delivery, which has to be a relief for grain originators. Another relief: Japan didn't close the door on U.S. exports of hard red spring and winter wheat.

On Wednesday, the Animal and Plant Health Inspection Service announced that a glyphosate resistant variety of wheat was found in a field more than nine years after Monsanto ended its research on Roundup Ready wheat. How the wheat got to that field remains one of the biggest mysteries in the case, and we likely won't know how it got there for weeks at the earliest.

The news put light pressure on the U.S. wheat markets on Thursday, but that's not a big surprise, DTN Senior Analyst Darin Newsom said.

"Chicago contracts have been down as much as 15 cents, but still near unchanged for the week. To me the key continues to be how white wheat basis reacts. Last night it looks like white wheat basis dropped about 5 cents," Newsom said.

"I think it is possible that continued concerns over smaller winter wheat production in the US could offset some of the pressure from a slowdown in white wheat demand. If so, it could localize the weaker market to the PNW. It will be important to see subsequent headlines out of Japan (and other Asian white wheat importers) have to say. For now, I think it is largely much ado about nothing, but certainly a situation worth monitoring."

As one of the U.S.'s top three export markets, along with Mexico and Nigeria, and one of the largest wheat importers in the world, it's a trading partner worth keeping happy.

So, how do we reassure our customers this wheat was an anomaly and not a widespread issue? Testing for the gene is complicated, and there currently is no rapid test that can be used at ports to verify that shipments don't contain the unapproved gene.

A representative of Japan's Ministry of Agriculture, Forestry and Fisheries told Dow Jones they're working with USDA and the embassies to make sure U.S. wheat is safe. (FDA concluded in 2004 that yes, it is. Link below) Japan will keep the suspension in place until a test kit is developed to identify GE wheat.

Japan has one of the most rigorous export inspection programs of any major buyer. After the export terminal runs quality tests, a USDA representative runs a quality test. Then it goes to a Japanese inspector, who works of a list of criteria that's more stringent that USDA's. Hopefully a rapid test kit will be just that, rapid. Otherwise sending a ship off to sea could become a much lengthier prospect.

FDA's note on safety of Roundup Ready wheat: http://1.usa.gov/…

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