WASHINGTON, Dec 29: Unusually high global demand for US wheat, which has been boosted by purchases from Japan and lower output from major producers due to weather, should last into the middle of next year.Weather has slashed wheat production in the European Union and Canada. Australia, which has been battered by four straight years of drought, has seen its output cut in half from about 25.4 million tons in the 2005-06 marketing year.

Global supplies are tightening as governments, such as Russia restrict exports to keep supplies at home on fears of shortages and food inflation. Other countries, including Japan and India, are aggressively stalking world markets to replenish grain bins.

“It leaves the world looking for wheat and the US is an available market,” said Jerry Norton, a wheat analyst with the USDA’s World Agricultural Outlook Board.

High demand for US exports could last well into next summer, when countries hit by weather will likely produce more normal-sized crops and create more supply competition for the US market, Norton said.

Wheat futures surged to an all-time high above $10 a bushel last week, but that did not stop Japan from buying US wheat for March and April shipments.

In its latest export sales report, USDA said US wheat exports for the week ended Dec. 20 totalled 299,100 tons with Japan accounting for a staggering 234,900 tons.

“They don’t care what it costs. All they care about is that they have it,” said Joe Sowers, a senior market analyst with US Wheat Associates, a trade group. “That clearly indicates the Japanese feel there is an impending shortage and that they need to get coverage before it happens.” Japanese officials have confirmed to Reuters that the country is stepping up its grain buying.

“Clearly, the market has entered into a new era in which a scramble for grains is going on,” Yasuo Sasaki, director at the ministry’s grain trade division, said in an interview. “We cannot lose the battle.” The United States, the world’s top wheat exporter, will command 30 per cent of the 105 million tons global wheat export market in the 2007-08 marketing year, up from around 22 per cent in the prior growing season. But the USDA’s Norton estimated the US share will be somewhat smaller than 30 per cent in 2008-09.

Wheat is one of the key grains for Japan’s 127 million people, but the country grows less than 15 per cent of the 5.7 million tons it needs. Japan will budget about $3.2 billion for wheat and barley imports for food use in the next fiscal year starting in April, more than double its current total, a reflection of higher prices.

However, there is speculation that the jump in prices has discouraged some potential wheat buyers. In recent days, Egypt cancelled a tender to purchase between 55,000 to 60,000 tons of wheat, and a wheat import tender by India lapsed with no decision on purchases.

“Increasingly, it will only be the wealthier countries that can bid up these kind of prices,” said Norton, who added that, as countries such as Japan have secured supplies, demand has weakened from countries that are reluctant to pay the market price.

The American Farm Bureau Federation, the country’s biggest farm group, said close attention will be given to Australia and how quickly it can ramp up production following four years of drought.—Reuters