Japanese Earthquake Impact May be Felt in Iowa, by Sampath Jayasinghe

posted on Friday, April 8, 2011

Japan is one of the United States major agricultural goods importers. In fact, the U.S. has been the largest corn and soybean exporter to Japan for many years. The market in Japan for these two commodities has been steadily growing over past decade. Iowa is the largest corn and soybeans producer and exporter in the United States. So what can we say about the likely impacts of current Japan crisis for Iowa exports and for U.S. agriculture? Though there is likely to be short-term negative impacts in the U.S. from the natural disasters in Japan, this can be overshadowed by rising food prices associated with high volatility in world energy prices.

In the short-term, agricultural exports may go down, which means Iowa farmers would lose at least a portion of a significant market in coming months with respect to international trade. But, long term, this disaster in Japan will bring positive benefits to the U.S. farmers. Once they begin to rebuild their economy in Japan, this will create a stronger demand for agricultural exports from the United States. Iowa farmers are going to be in good position to provide those agricultural commodities that are in high demand. In addition, Iowa farmers will benefit from higher prices for those commodities such as corn and soybeans.

Corn and soybeans are very tight in supply at this time irrespective of the Japanese disaster. Corn has traded just around $7 a bushel last month and rallied even higher this month following the USDA announcement of higher growing world demand expectations. Higher demand coupled with higher oil prices and international unrest has caused higher commodities prices. Given these whole blend of things that have influenced the agricultural markets, one can envision that negative impacts of Japanese disaster on agriculture exports won't be long felt in the United States.

  1. earthquake
  2. japan