Japan Important to U.S. Agriculture

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In the past couple of weeks, we have all witnessed the news reports of the death, destruction and suffering following one of the worst earthquakes in Japan’s history, and the tsunami that followed. The devastation in the northern third of Japan is almost unbelievable, and millions of people are impacted by the follow-up impacts of the disaster. The after-effects of the 9.0 earthquake and tsunami, as well as the potential issues from the failing nuclear power plant, are likely to affect Japan for years to come.

Japan is a small, densely populated country, with 127 million people in a land area about the size of Montana. A high percentage of the population in Japan lives relatively close to the 17,850 miles of coastline, as 67% of the land area is forest and woodland, with much of it being very mountainous. Less than 12% of Japan’s land area is arable farmland, which is about the same amount of tillable farmland in Maryland and Delaware. Japan has a fairly significant livestock industry, given it’s land area, with about 2.9 million head of dairy and beef cattle and 9.7 million hogs, which compares to 2.4 million cattle and 7.3 million hogs in Minnesota on Jan. 1, 2010.

Given Japan’s fairly large population and limited agricultural production capacity, the country relies heavily on exports to meet their food and feed demands, importing about 60% total food needs last year. Japan has been a major customer for U.S. agricultural exports for many years, being the leading export destination for U.S. corn, second leading foreign buyer of U.S. wheat and fourth in purchases of U.S. soybeans. Japan traditionally imports approximately 16 million metric tons (mmt) – or about 630 million bushels – of corn from the U.S. each year. Much of that corn is used for livestock feed in Japan. Japan imports about 3 mmt of both wheat and soybeans annually from the U.S.

As Japan’s economy has improved over the past few decades, so has the appetite of their people for more protein in their diets, which has resulted in higher exports of U.S. meat and meat products to the country in recent years. Japan is the largest export customer of U.S. pork on a total dollar basis, importing more than $1.6 billion of pork in 2010, which represents about 30% of the total U.S. pork exports. U.S. pork exports to Japan in January 2011 were 24% above a year earlier. Japan also imports significant amount of beef, poultry and dairy products from the U.S.

In the days following the disaster in Japan, the primary focus has been on finding survivors, treating the injured and assessing the damage, as well as trying to avert a potential nuclear plant disaster. Hundreds of thousands of people have been displaced from their homes, are without electricity and are dealing with shortages of food and water. Initially, much of Japan’s economic activity, including export activities with other countries, came to a halt. However, as days have passed following the earthquake and tsunami, economic activity started to resume somewhat in areas of Japan that were not as severely impacted by the disaster. It appears that two major northern Japan ports for incoming products from other countries were severely damaged by the disaster, but that many of the major ports for U.S. agricultural products in southern Japan are continuing to operate. Many of the roads and infrastructure in northern Japan are also destroyed or severely damaged, which will make it difficult to transport products within that section of the country.

It will likely be a long, slow recovery in Japan following the devastating earthquake and tsunami, and the potential problems that may arise from the failing nuclear plant. There will likely be some short-term affect on U.S. agricultural exports to Japan, as the country deals with the immediate effects of the disaster. It is still way too early to assess any long term impacts on the U.S. agricultural industry.

 

Market Reaction

Corn and soybean markets fell sharply in the first couple days following the Japan earthquake and tsunami; however, the markets did recover somewhat in the next few days. Both corn and soybean markets have dropped off their peak levels in February, but the overall market signals are still quite positive, given the very tight projected ending stocks for both commodities. Livestock markets also dropped sharply following the Japan disaster, but did recover somewhat in recent days. The long-term market trends for both the hog and cattle market prices remain positive.

 

Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at kent.thiesse@minnstarbank.com.

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