Japan has increased its wheat import estimate to 1.21 million metric tons for the 2012 financial year, up 58 percent from March predictions, according to reports. The demand has been attributed to a tightening in corn supplies and an increase in prices due to the worst U.S. drought in decades, which caused Japan's use of corn in animal feed to fall in July for the seventh straight month to hit a 20-year low.

The U.S. Department of Agriculture has estimated the 2012 corn harvest at 10.727 billion bushels, the smallest crop in six years, with the lowest yield in 17 years at 122.8 bushels per acre. Japan's revised import target for feed wheat is almost triple the figure of 427,000 metric tons in the 2011 financial year, according to a farm ministry official. The ratio of wheat in Japan's feed production in July rose to 4.1 percent, the highest in at least in two decades, from 1.2 percent during the same time in 2011. Feed wheat imports from January to July in 2012 have already reached 490,000 metric tons, mostly from Australia and the U.S., with Canada and Russia providing small volumes.

In the past, wheat has been cheaper than corn, but now the reverse is true, with Australian feed wheat quoted around $380 per metric ton, including cost and freight, and Indian wheat at $355 per metric ton. This compares with corn being traded into South Korea at $307 per metric ton. On September 21, Chicago Board of Trade new-crop December corn was quoted at $7.51 per bushel, compared with December wheat at $8.93-1/4 per bushel.