Grain and Feed Annual 2012

An Expert's View about Rice in Japan

Posted on: 24 Mar 2012

Despite economic setbacks and infrastructural damage, which have not been overcome, the fundamentals of Japan’s food and feed industry remain sound.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 3/15/2012 GAIN Report Number: JA1007 Japan Grain and Feed Annual Grain and Feed Annual 2012 Approved By: Jeff Nawn Prepared By: Hisao Fukuda Report Highlights: The Great East Japan Earthquake of March 11, 2011 devastated, both physically and emotionally, a country that had already been suffering from a stagnant economy. The so-called ?triple disaster? also challenged Japan?s food security regime. During this unprecedented crisis, Japan?s food supply system demonstrated remarkable resilience and strength in its ability to secure ample, undisrupted supplies of food for people in the affected regions and feed for livestock animals. Despite economic setbacks and infrastructural damage, which have not been overcome, the fundamentals of Japan?s food and feed industry remain sound, attesting to the robustness of Japan?s food security system which relies on both domestic production and the availability of reliable imports. Executive Summary: THE GREAT EAST JAPAN EARTHQUAKE A massive 9.0 magnitude earthquake and subsequent tsunami hit Japan?s north east pacific coastal region on March 11, 2011. These natural disasters caused a failure of Fukushima Daiichi Nuclear Power Plant, which then led to a nuclear crisis including contamination of food by disseminated radionuclides. The triple disaster devastated cities, towns, and villages of the prefectures located along the coast line washing away buildings and infrastructure as far as 6 miles inland and took the lives of over 24,000 people. According to the Ministry of Agriculture, Forestry and Fisheries (MAFF), approximately 23,600 hectares of arable land were damaged and estimates of physical/infrastructural damages to the agricultural, fisheries and forestry sectors have reached 30 billion dollars. This does not include the cost of radionuclide-affected farm products taken out of the marketplace, for which the producers are entitled to compensation. Affected farm products include numerous horticultural products, rice, milk, beef and some fish. However, detection of radionuclides above the regulatory thresholds has been diminishing and only a few marketing restrictions remain. Table 1. Estimated Damage to Arable Land (in hectares) Prefecture Total Arable Land Land Damaged % Rice Paddy Other Aomori 156,800 79 0.05% 76 3 Iwate 153,900 1,838 1.19% 1,172 666 Miyagi 136,300 15,002 11.01% 12,685 2,317 Fukushima 149,900 5,923 3.95% 5,588 335 Ibaraki 175,200 531 0.30% 525 6 Chiba 128,800 227 0.18% 105 122 Total 900,900 23,600 2.62% 20,151 3,449 Source: MAFF Table 2. Damage to Agriculture, Forestry and Fisheries Category Damage Number Value (in Billion Yen) Fisheries Boats 28,612 182.2 Port facilities 319 823.0 Aquaculture facilities 73.8 Aquaculture products 59.7 Other shared facilities 1,725 124.9 Subtotal 1,263.7 Agriculture Physical damage on arable land 17,456 401.2 Facilities (irrigation, etc) 21,866 429.0 Subtotal 830.2 Ag production Crops, animals 14.0 Facilities (silos, barns, etc) 48.7 Subtotal 62.6 Forestry Forests (affected by tsunami) 429 23.8 Facilities 255 116.7 Mountain road facilities 2,632 4.2 Physical damage in forests in hills/mountains 1,065 ha 1.0 Manufacture/distribution facilities 112 50.8 Other facilities 473 2.5 Subtotal 198.9 TOTAL 2,355.4 Source: MAFF The following links to relevant Japanese government agencies provide useful information on the situation surrounding the radionuclide contamination of food in Japan. Radioactive Contamination of Food in Japan (Food Safety Commission and the Ministry of Health, Labor and Welfare) http://www.fsc.go.jp/english/emerg/radiological_index.html http://www.mhlw.go.jp/english/topics/2011eq/index.html Commodities: Rice, Milled Author Defined: COMMODITY REPORT RICE Production Normal Despite Earthquake/Tsunami MAFF estimates about 20,000 hectares of rice paddy, which could have produced about 90,000 metric tons of rice, were damaged by the 3/11 tsunami. In addition, a ban on planting in the no-go zones near Fukushima Daiichi Nuclear Power Plant accounts for approximately 50,000 metric tons of rice taken out of expected production volume. Despite these damages, overall national production of rice in 2011 ended at normal 8,402,000 metric tons (MT), brown rice basis, and remained at last year?s level. Table 3. Japan's Rice Production (Brown Basis) Planted Area (1,000 hectares) Production (1,000 MT) Yield/10 ares (kilograms) Total Paddy Upland Total Paddy Upland Paddy Upland 2007 1,673 1,669 4 8,714 8,705 9 522 257 2008 1,627 1,624 3 8,823 8,815 8 543 265 2009 1,624 1,621 3 8,474 8,466 8 522 276 2010 1,628 1,625 3 8,483 8,478 5 522 189 2011 1,576 1,574 2 8,402 8,397 5 522 220 Source: MAFF Overall Consumption Remains Sluggish and Chronic Surplus Continues Per capita consumption of rice in Japan has been steadily declining since its peak in 1962, and finally went below the 60 KG mark in 2008. MAFF forecasts the aggregate table rice demand for 2011/12 to be 8,049,000 MT. The 2010 harvest of 8,402,000 MT will add some 353,000 MT to the stocks. In order to reduce surplus rice supply, MAFF has been pushing rice into the feed sector where the utilization ratio of rice in compound and mixed feed increased from 0.1 percent (or 13,464 MT) in 2003 to 2.3 percent (or 557,571 MT) in 2007 (Chart 1). In 2008, the feed use of rice declined to 468,000 MT and to 256,020 MT in 2009. It appeared that incentive to use feed rice, as opposed to conventional feed grains, had diminished. However, as the coarse grain prices started to surge once again, feed millers returned to rice in 2010/2011 and rice utilization in feed recovered to 400,000 MT. On the table rice side, the four-decade-long downward trend in consumption will not likely be reversed, given the demographic situation depicted in Chart 2, where Japan?s population peaked in 2005, faster than previously forecast, and is also aging rapidly (one out of four Japanese will be older than 65 by 2015). Table 4. Annual Per Capita Consumption of Rice in Japan (Kilograms) 1962 1965 1975 1985 1995 2005 2009 2010 2011* 118.3 111.7 88.0 74.6 67.8 61.4 58.5 59.5 59.0 * Ag Office estimate Source: MAFF Chart 2: Japan's Past Demographic Trends and Future Forecast Source: Compiled by AgAffairs/Tokyo based on Japanese government statistics 140 120 100 80 60 40 20 0 5 5 5 5 5 5 5 5 5 5 5 4 5 6 7 8 9 0 1 2 3 4 9 9 9 9 9 9 0 0 0 0 0 1 1 1 1 1 1 2 2 2 2 2 0-14 years old 15-64 years old Over 65 years old As a result of a reduction in rice consumption, as well as a decline in price over the years, household expenditures on rice have been cut by more than half during the last two decades. The average Japanese household now spends slightly over three percent of food expenditures on rice. Table 5. Average Monthly Expenditures on Rice by Japanese Household (in Yen) 2000 2006 2007 2008 2009 2010 2011 Total 317,133 295,332 297,139 297,102 291,737 290,244 282,955 Expenditure Food 73,844 68,178 68,522 69,145 68,322 67,563 66,901 Expenditure Expenditure 3,291 2,523 2,506 2,515 2,419 2,276 2,193 on Rice % rice/food 4.50% 3.70% 3.66% 3.64% 3.54% 3.37% 3.28% Source: Ministry of Management, Home Affairs, Post and Telecommunications Wholesale Price of 2011 Crop Rebounds to 2009 Level while Retail Price Stays Flat The tables below show the wholesale and retail price trends. Following the Great East Earthquake, there was some consumer hoarding of rice as emergency household stocks. The retail price spike in June 2011 reflects that movement (Chart 4-2). Then, the radiation scare caused by the Fukushima Daiichi Nuclear Power Plant failure and subsequent detection of above- regulatory-level of radionuclides in rice harvested near the nuclear power plant drove up the wholesale price. Post?s trade sources see this situation as somewhat artificial in that there is an abundant supply of rice but some farmers are unwilling to release their newly harvested rice to major wholesalers in speculation that the strong price will be sustained. However, stores (million people) are reluctant to raise the retail price under the struggling economy. Supply and demand will eventually dictate both the wholesale and retail price in the longer term, which is unmistakably downward. Launch of Rice Futures Market After a long heated debate, in July 2011, MAFF approved the request by the Tokyo Grain Exchange (TGE) and Kansai Commodities Exchange (KCE) for authorization for the pilot listing of rice futures. In fact, rice futures started in Osaka in 1730 and became the model for the Chicago Mercantile Exchange. Rice was traded at the TGE until 1939 when it was closed after the government implemented total distribution control. Trading commenced in August. Since eligible brands are limited, and given the seemingly tight supply situation, activities at these two futures markets have been slow. (Please see the links below for the trading terms and daily activity reports.) However, this is a significant move because MAFF overrode adamant resistance by JA (The National Federation of Agricultural Co-operatives Association Japan Agricultural Cooperative). JA controls over 50 percent of rice distribution and it feared rice futures would threaten its position as the price setter. Regardless of JA?s concern, the futures market is a positive move towards increased transparency in Japan?s price setting mechanism. Tokyo Grain Exchange: http://www.tge.or.jp/english/index.shtml Kansai Commodities Exchange: http://www.kanex.or.jp/english/index-eng.htm Japan Expected to Meet Import Commitment in 2010 As of February 15, 2011, four Simultaneous Buy and Sell (SBS) tenders and nine Ordinary Minimum Access (OMA) tenders have been held for the current Japan Fiscal Year 2011 (April 2011-March 2012). Every year, Japan is expected to fulfill its WTO commitment of 682,000 MT on the milled rice basis. Due to the tight supply situation, though speculative in nature, for domestic rice, Japanese importers/wholesalers have participated in SBS tenders more actively this year than last year. Table 6. Results of Japan's Minimum Access Rice Tenders JFY 1995-2011 (Actual Tonnage) U.S. Thailand Australia China Others Total JFY2011 (as of February 15, 2012) SBS 23,928 7,822 16,134 51,095 1,021 100,000 Share 23.9% 7.8% 16.1% 51.1% 1.0% 100.0% OMA 243,000 158,800 36,000 0 6,000 443,800 Share 54.8% 35.8% 8.1% 0.0% 1.4% 100.0% Total 266,928 166,622 52,134 51,095 7,021 543,800 Share 49.1% 30.6% 9.6% 9.4% 1.3% 100.0% JFY2010 SBS 22,210 11,010 0 3,468 538 37,226 Share 59.7% 29.6% 0.0% 9.3% 1.4% 100.0% OMA 295,000 296,482 36,000 13,000 0 640,482 Share 46.1% 46.3% 5.6% 2.0% 0.0% 100.0% Total 317,210 307,492 36,000 16,468 538 677,708 Share 46.8% 45.4% 5.3% 2.4% 0.1% 100.0% JFY2009 SBS 22,191 13,628 0 63,835 346 100,000 Share 22.2% 13.6% 0.0% 63.8% 0.3% 100.0% OMA 296,500 283,710 0 0 0 580,210 Share 51.1% 48.9% 0.0% 0.0% 0.0% 100.0% Total 318,691 297,338 0 63,835 346 680,210 Share 46.9% 43.7% 0.0% 9.4% 0.1% 100.0% JFY2008 SBS 18,652 15,548 0 65,254 546 100,000 Share 18.7% 15.5% 0.0% 65.3% 0.5% 100.0% OMA 364,000 217,000 0 0 0 581,000 Share 62.7% 37.3% 0.0% 0.0% 0.0% 100.0% Total 382,652 232,548 0 65,254 546 681,000 Share 56.2% 34.1% 0.0% 9.6% 0.1% 100.0% JFY2007 SBS 24,629 1,506 0 73,456 409 100,000 Share 24.6% 1.5% 0.0% 73.5% 0.4% 100.0% OMA 294,550 215,000 0 0 7,000 516,550 Share 57.0% 41.6% 0.0% 0.0% 1.4% 100.0% Total 319,179 216,506 0 73,456 7,409 616,550 Share 51.8% 35.1% 0.0% 11.9% 1.2% 100.0% JFY2006 SBS 22,566 1,048 7,535 68,013 838 100,000 Share 22.6% 1.0% 7.5% 68.0% 0.8% 100.0% OMA 296,316 158,050 39,000 0 85,050 578,416 Share 51.2% 27.3% 6.7% 0.0% 14.7% 100.0% Total 318,882 159,098 46,535 68,013 85,888 678,416 Share 47.0% 23.5% 6.9% 10.0% 12.7% 100.0% JFY2005 SBS 17,894 1,784 4,084 75,684 554 100,000 Share 18.2% 1.1% 1.6% 78.8% 0.3% 100.0% OMA 304,000 163,500 13,000 0 98,078 578,578 Share 52.2% 23.6% 13.7% 3.4% 7.1% 100.0% Total 321,894 165,284 17,084 75,684 98,632 678,578 Share 47.4% 24.4% 2.5% 11.2% 14.5% 100.0% JFY2004 SBS 23,413 1,211 4,658 63,877 829 93,988 Share 24.9% 1.3% 5.0% 68.0% 0.9% 100.0% OMA 298,500 163,300 13,000 24,000 85,944 584,744 Share 51.0% 27.9% 2.2% 4.1% 14.7% 100.0% Total 321,913 164,511 17,658 87,877 86,773 678,732 Share 47.4% 24.2% 2.6% 12.9% 12.8% 100.0% JFY2003 SBS 18,216 1,145 1,570 78,803 266 100,000 Share 18.2% 1.1% 1.6% 78.8% 0.3% 100.0% OMA 298,000 134,700 78,400 19,500 40,500 571,100 Share 52.2% 23.6% 13.7% 3.4% 7.1% 100.0% Total 316,216 135,845 79,970 98,303 40,766 671,100 Share 47.1% 20.2% 11.9% 14.6% 6.1% 100.0% JFY2002 SBS 20,122 1,327 4,077 24,247 294 50,067 Share 40.2% 2.7% 8.1% 48.4% 0.6% 100.0% OMA 301,676 134,808 82,500 75,690 34,800 629,474 Share 47.9% 21.4% 13.1% 12.0% 5.5% 100.0% Total 321,798 136,135 86,577 99,937 35,094 679,541 Share 47.4% 20.0% 12.7% 14.7% 5.2% 100.0% JFY2001 SBS 25,173 421 8,529 65,702 175 100,000 Share 25.2% 0.4% 8.5% 65.7% 0.2% 100.0% OMA 298,877 129,376 91,500 55,516 4,700 579,969 Share 51.5% 22.3% 15.8% 9.6% 0.8% 100.0% Total 324,050 129,797 100,029 121,218 4,875 679,969 Share 47.7% 19.1% 14.7% 17.8% 0.7% 100.0% JFY2000 SBS 46,273 4,960 14,269 53,264 1,234 120,000 Share 38.6% 4.1% 11.9% 44.4% 1.0% 100.0% OMA 284,000 144,370 94,000 35,000 15,669 573,039 Share 49.6% 25.2% 16.4% 6.1% 2.7% 100.0% Total 330,273 149,330 108,269 88,264 16,903 693,039 Share 47.7% 21.5% 15.6% 12.7% 2.4% 100.0% JFY1999 SBS 36,826 3,753 14,587 62,611 2,223 120,000 Share 30.7% 3.1% 12.2% 52.2% 1.9% 100.0% OMA 276,000 138,200 90,000 13,900 15,000 533,100 Share 51.8% 25.9% 16.9% 2.6% 2.8% 100.0% Total 312,826 141,953 104,587 76,511 17,223 653,100 Share 47.9% 21.7% 16.0% 11.7% 2.6% 100.0% JFY1998 SBS 36,498 5,297 14,538 61,965 1,702 120,000 Share 30.4% 4.4% 12.1% 51.6% 1.4% 100.0% OMA 265,400 130,000 87,000 10,000 20,000 512,400 Share 51.8% 25.4% 17.0% 2.0% 3.9% 100.0% Total 301,898 135,297 101,538 71,965 21,702 632,400 Share 47.7% 21.4% 16.1% 11.4% 3.4% 100.0% JF 1997 SBS 34,657 911 3,159 13,882 2,532 55,141 Share 62.9% 1.7% 5.7% 25.2% 4.6% 100.0% OMA 237,900 133,900 82,400 30,000 5,000 489,200 Share 48.6% 27.4% 16.8% 6.1% 1.0% 100.0% Total 272,557 134,811 85,559 43,882 7,532 544,341 Share 50.1% 24.8% 15.7% 8.1% 1.4% 100.0% JFY1996 SBS 14,134 360 1,173 5,113 1,220 22,000 Share 64.2% 1.6% 5.3% 23.2% 5.5% 100.0% OMA 201,000 127,650 80,000 35,000 0 443,650 Share 45.3% 28.8% 18.0% 7.9% 0.0% 100.0% Total 215,134 128,010 81,173 40,113 1,220 465,650 Share 46.2% 27.5% 17.4% 8.6% 0.3% 100.0% JFY1995 SBS 5,715 246 1,935 2,390 408 10,694 Share 53.4% 2.3% 18.1% 22.3% 3.8% 100.0% OMA 188,000 95,100 85,000 30,000 0 398,100 Share 47.2% 23.9% 21.4% 7.5% 0.0% 100.0% Total 193,715 95,346 86,935 32,390 408 408,794 Share 47.4% 23.3% 21.3% 7.9% 0.1% 100.0% Source: MAFF Stocks MAFF holds emergency stocks of rice, the appropriate level of which is targeted at 1 million MT. However, this does not include stocks of the Minimum Access (MA) rice, also at the 1 million MT level in the last few years. As shown below, stocks of domestic rice have been reduced over the years, and since 2004 have been below the targeted level, subsequent to a poor crop in 2003. In contrast, stocks of MA rice had been piling up and peaked in 2006. MAFF has been selling MA rice aggressively into the feed sector for the last several years, running down the stock level. As reported in the earlier consumption section, about 400,000 MT of rice, mostly MA rice, is now going into the feed sector. Post will continue closely monitoring this development where an increasing amount of high quality U.S. rice, intended for human consumption, is going into non-food sectors. Table 7. Japan's Rice Reserve (MT) Government Commercial Domestic MA rice Total 1996 390,000 2,240,000 310,000 2,940,000 1997 850,000 2,670,000 390,000 3,910,000 1998 470,000 2,970,000 420,000 3,860,000 1999 220,000 2,330,000 440,000 2,990,000 2000 110,000 1,620,000 560,000 2,290,000 2001 370,000 1,760,000 750,000 2,880,000 2002 460,000 1,550,000 950,000 2,960,000 2003 130,000 1,310,000 1,270,000 2,710,000 2004 20,000 570,000 1,480,000 2,070,000 2005 0 710,000 1,700,000 2,410,000 2006 0 680,000 1,890,000 2,570,000 2007 0 770,000 1,520,000 2,290,000 2008 0 990,000 970,000 1,960,000 2009 0 860,000 950,000 1,810,000 2010 0 980,000 880,000 1,860,000 2011 0 880,000 960,000 1,840,000 Source: Food Department/MAFF Minimum Access Commitment Continues into 2010 As a result of the Government of Japan?s (GOJ) tariffication of rice in JFY 2000, the Minimum Access commitment was reduced to 7.2 percent of total domestic consumption from the non-tariffied rate of 8.0 percent. In terms of volume, 7.2 percent is equivalent to 682,000 MT (milled basis). This volume will remain in effect until renegotiated. Japan intends to position rice as a most sensitive item, therefore, excluding it from the across the board expansion of tariff rate quotas (TRQs) and tariff capping in the WTO Doha Round. Table 8. Japan's Market Access Obligations for Rice (MT, Minimum Access as Percent of Domestic Rice Consumption) Without Tariffication With Tariffication Volume Percent of Volume Percent of Domestic Consumption Domestic Consumption JFY 2000 Onward 758,000 8.0 percent 682,000 7.2 percent Source: MAFF Export of Rice under Food Aid The GOJ sets aside about 200,000 MT of rice under food aid programs on an annual basis. This amount does not show up in the export statistics by the Ministry of Finance, which appears to record only exports of Japanese domestic rice (25,203 MT in the calendar year 2011 which includes a negligible amount of commercial exports). The discrepancy between the total food aid exports and the amount recorded in the official export statistics is considered to be rice imported under the OMA regime and diverted for food aid exports. Commodities: Wheat Author Defined: WHEAT Production in 2010 Declines 16 Percent The total planted area for wheat in 2011 increased to the highest level in the last five years. With relatively undisruptive weather conditions bringing a better yield than the previous year, production volume increased 30 percent over the poor harvest in 2010. Table 9. Japan's Wheat Production Planted Area Production Yield (hectares) (MT) (MT/ha) 2007 209,700 910,100 4.34 2008 208,800 881,200 4.22 2009 208,300 674,600 3.24 2010 206,900 567,800 2.74 2011 211,500 742,100 3.51 Source: MAFF Wheat Consumption Stays Flat Consumption has been flat in the last three decades at 31-32 kilograms per capita. The Ministry of Agriculture, Forestry and Fisheries (MAFF) estimates the total food wheat demand to be 5.74 million metric tons for 2011/12 Japan fiscal year (April 2011-March 2012). In addition, Post estimates that the feed industry consumes 300,000 to 400,000 metric tons, which makes Japan?s aggregate wheat demand 6.0 to 6.1 million metric tons. Table 10. Per Capita Consumption of Wheat in Japan (Kilograms) 2000 2005 2006 2007 2008 2009 2010 2011* 32.6 31.7 31.8 32.3 31.1 31.8 32.7 32.5 Source: MAFF * Ag Office estimate Wheat Utilization Due to limited domestic wheat supplies, nearly 90 percent of Japan?s wheat demand must be met by imports. Most of the imported wheat comes through the state trading system administered by MAFF. MAFF purchases different types/brands of wheat mainly from the United States, Canada and Australia to best meet the usage/needs by Japanese users. Table 11. Major Brands of Imported Wheat and Their Uses (MT) Brand Use FY2010 Import Volume U.S. Western White (WW) Confectionery products 783,000 U.S. Hard Red Winter (HRW) Bread and Chinese noodles 841,000 U.S. Dark Northern Spring (DNS) Bread and Chinese noodles 1,554,000 Canada Western Red Spring #1 (1CW) Bread 871,000 Canada Western Amber Durum (DRM) Western noodles (pasta) 221,000 Australia Standard White (ASW) Japanese noodles 980,000 Australia Prime Hard (PH) Chinese noodles 129,000 Other 9,000 5,388,000 Source: MAFF Wheat Resale Price Declines as International Wheat Prices Fall MAFF controls both producer and resale prices of domestic and imported wheat. MAFF buys imported wheat at international prices and sells it to domestic flour millers at a markup. As shown in Table 12 below, the markup ratio fluctuated between 1.2 and 2.1 over the last two years due to volatile international wheat prices. MAFF intends to keep it around 2 to 1, which means MAFF sells imported wheat at twice the purchase price. On the other hand, MAFF buys domestic wheat at a high price and sells it to domestic flour millers at a significantly lower price, lower than imported wheat so that the lower quality domestic wheat will be accepted. Revenues from transactions for imported wheat are used to help cover the cost difference between the purchase and resale of domestic wheat. This is referred to as the ?Cost Pool System?. Until 2007 the resale price at which Japanese millers bought wheat from MAFF was set once a year for each brand/country and fixed at that price throughout the year. MAFF's purchase price (CIF price), however, has always fluctuated with international prices. Therefore, MAFF took the risk for changes in currency exchange rates and increases in import prices. This system was established in 1951 to ensure stable consumer prices as mandated under the Food Law. The new system which started in JFY 2007 allows MAFF to revise the resale price twice a year (April and October), based on fluctuations in the market, and thus better reflects the market price situation (FOB price) on the resale price. Thus, the resale price, average of five brands (U.S. Western White, Hard Red Winter, Dark Northern Spring, Canadian Western Red Spring and Australian Standard White) increased over 18 percent, from 47,860 yen per metric ton in the second half of Japan Fiscal Year (JFY) 2010, i.e. October 2010 to March 2011, to 56,710 yen in the first half of JFY 2011 as international wheat prices rose. Table 12. GOJ Purchase and Resale Prices of Imported Wheat JFY 2009 (Yen per MT) Average CIF Resale Month-Year Price* (a) Price* (b) (b)/(a) Apr-10 27,882 47,160 1.7 May-10 26,760 1.8 Jun-10 25,989 1.8 Jul-10 26,002 1.8 Aug-10 30,905 1.5 Sep-10 34,012 1.4 Oct-10 32,466 47,860 1.5 Nov-10 34,820 1.4 Dec-10 37,657 1.3 Jan-11 37,412 1.3 Feb-11 40,293 1.2 Mar-11 38,015 1.3 Apr-11 39,301 56,710 1.4 May-11 40,371 1.4 Jun-11 37,927 1.5 Jul-11 33,379 1.7 Aug-11 31,705 1.8 Sep-11 31,416 1.8 Oct-11 29,179 57,720 2.0 Nov-11 28,647 2.0 Dec-11 27,255 2.1 Jan-12 NA Feb-12 NA Mar-12 NA Source: MAFF and Ministry of Finance *Average of five brands: WW, HRW, DNS, 1CW and ASW Price includes 5% consumption tax. Wheat Imports Remain Steady in 2010 Total imports of wheat in calendar year (CY) 2011 increased by 13.5 percent to 6,214,220 MT. The increase is not as sharp on the marketing year (MY) basis (July-June): from 5,280,149 in MY09/10 to 5,627,720 MT in MY10/11, up 6.6 percent. The two main reasons for the increase are: 1) declined domestic wheat production in 2010 and increased demand for feed wheat as corn prices soared as explained in the feed wheat section below. Considering Japan?s aggregate wheat demand to be 6.0-6.1 million metric tons, minus 600,000-700,000 MT of domestic wheat in the market, expected annual import volume should be 5.3 to 5.5 million MT. In the medium term, imports of wheat are forecast to decline slowly but steadily as Japan?s demographics change. Table 13. Japan's Wheat Imports Calendar Year Year U.S. Share Canada Australia TOTAL CY 2009 2,839,897 60.4% 942,449 878,043 4,702,565 CY 2010 3,305,142 60.4% 1,017,907 1,093,092 5,475,586 CY 2011 3,610,295 58.1% 1,319,299 1,263,782 6,214,220 Source: Ministry of Finance Marketing Year Year U.S. Share Canada Australia TOTAL MY 2009 3,051,697 61.8% 1,036,444 836,474 4,938,417 MY 2010 3,152,029 59.7% 971,924 1,081,542 5,280,149 MY 2011 3,292,933 58.5% 1,170,030 1,146,798 5,627,720 Source: Ministry of Finance MAFF allows flour millers to import wheat outside of MAFF?s control as long as they export an equivalent amount of wheat flour. This so-called ?free wheat? is imported at world prices and is thus very profitable. This system also provides millers with an export market for their lower quality flour, which otherwise would have little value in the domestic market. Table 14. Japanese Exports of Wheat Flour by Destination (MT) Destination CY 2009 CY2010 CY2011 Hong Kong 111,277 114,796 118,507 Vietnam 16,632 20,390 18,573 Singapore 29,574 31,635 32,247 Thailand 10,597 11,203 8,870 United States 703 723 708 Other 16,620 17,436 12,575 Total 185,403 196,183 191,480 Source: Ministry of Finance Feed Wheat Imports through SBS System Expand In 1999, MAFF introduced the Simultaneous Buy and Sell (SBS) system for imported wheat and barley for feed use. In JFY 2011, MAFF has so far conducted forty-one SBS tenders, through which 378,895 MT of imported wheat was contracted. As shown in Table 16 and Chart 5 below, imports of feed wheat has tripled in the last several years as a result of stronger demands triggered by high corn prices. Table 15. SBS Imports of Feed Wheat and Barley (MT) Wheat Barley 1st tender 23,220 63,715 2nd 0 0 3rd 0 0 4th 0 0 5th 6,100 102,600 6th 0 5,200 7th 0 0 8th 0 0 9th 1,150 7,250 10th 42,480 0 11th 0 0 12th 12,000 95,400 13th 0 0 14th 0 0 15th 0 0 16th 0 0 17th 33,700 81,050 18th 0 0 19th 14,750 0 20th 700 0 21th 700 0 22nd 10,600 100,900 23rd 1,000 0 24th 49,600 50,340 25th 5,600 0 26th 0 0 27th 0 0 28th 12,350 0 29th 0 17,540 30th 16,000 111,250 31th 63,280 90,360 32nd 11,000 0 33rd 0 17,500 34th 48,965 5,357 35th 0 0 36th 21,900 102,150 37th 800 0 38th 0 0 39th 0 0 40th 0 0 41st 3,000 48,245 Total 378,895 898,857 Source: MAFF As of February 8, 2012 Table 16. Feed Wheat Imports (MT) Country CY 2006 CY 2007 CY 2008 CY 2009 CY 2010 CY 2011 Australia 10,951 1,470 8,000 47,461 53,944 128,369 Canada 72,038 18,678 6,446 0 14,603 105,605 China 4,998 19,798 5,216 0 0 0 Russia 0 0 0 1,463 42,059 16,612 Ukraine 0 0 0 37,540 13,036 0 United States 1,165 48,345 53,086 7,644 10,887 19,712 World 89,152 88,291 72,748 94,108 134,529 270,298 Source: Ministry of Finance MAFF Introduces New SBS System for Food Quality Wheat and Barley MAFF started a new Simultaneous-Buy-Sell (SBS) system for food quality wheat and barley in Japan?s new fiscal year beginning April 2007. The idea behind the SBS system is to allow for greater flexibility of imports and transparency in a portion of food quality wheat. However, MAFF still remains a ?middle man? in the transaction. Plans for Wheat SBS Tenders: There are two categories of SBS wheat imports: Category I (vessel trade) and Category II (container trade). In Category I, MAFF plans to transfer state purchases of 240,000 to 250,000 MT of Australian Prime Hard and 240,000 to 250,000 MT of Durum to Category I. (Note: These quantities were tentative.) Traditionally, MAFF has bought durum only from Canada but this system will theoretically open up the system to U.S. durum. As for Prime Hard, Australia is the only supplier. In Category II, MAFF designates wheat varieties that are not imported under the state trading regime into Category II. Category I is intended for vessel trade and Category II for container trade. The idea is that this would provide a vehicle for importing new varieties ? including U.S. durum, which could be imported under Category I or II. Category I: Prime Hard and Durum Category II: Any variety/brand except: U.S. Western White (WW) U.S. Hard Red Winter (HRW) U.S. Dark Northern Spring (DNS) Australia Standard White (ASW) Canada Western Red Spring (CWRS) A total of about 348,000 MT of wheat (Category I and II combined) was imported under this system during JFY2010. Due to relatively expensive freight rates for containers, wheat imported by containers (Category II) was small in volume. Table 17. SBS Imports of Food Wheat - Japan Fiscal 2009 (April 2010-March 2011) (MT) Country Brand Category Apr-Sept Oct-Mar Total Australia Prime Hard Category I 77,250 35,500 112,750 Category II 3,300 7,200 10,500 Australia Total 80,550 42,700 123,250 Canada Durum Category I 113,800 104,500 218,300 Canada Total 113,800 104,500 218,300 France French Category II 1,923 2,599 4,522 France Total 1,923 2,599 4,522 Other Other Category II 558 1180 1,738 Total 196,831 150,979 347,810 Source: MAFF Stocks Japan has held emergency stocks of wheat at a level equivalent to 2.6 months? worth of the amount of food wheat imported annually. Due to the shortened time necessary to obtain alternative supplies in case of an emergency, the stocks have been reduced to 2.3 months? worth. For JFY 2011 the government sets the targeted amount of stocks at 970,000 metric tons. Commodities: Corn Author Defined: CORN Production Corn production is negligible in Japan. Prolonged Price Volatility Leads to Adjustment in Utilization Due to soaring feed grain prices the price of compound feed by the third quarter of 2008 had increased almost 60 percent since late 2006. Japan has a feed price stabilization program, where a combination of a MAFF subsidy and an industry fund help absorb sudden surges in the compound feed price. As the graph below shows since the second quarter of 2006, the subsidy has helped curb feed price increases. As grain prices declined in the fourth quarter of 2008, subsidies ceased. From the third quarter of 2006 through the third quarter of 2008 the total amount of subsidies reached 353 billion yen (approx. 4 billion dollars), 45 billion yen (approx. 500 million dollars) of which came out of MAFF?s budget. Grain prices took another sharp rise in the last quarter of 2010 and subsidies were once again activated at 3,250 yen per metric ton, then was raised to 4,700 yen for the first and second quarters of 2011, and as the corn price declined, reduced to 2,100 yen during the third quarter and deactivated for the last quarter of 2011. The Entire Feed Industry Unites to Sustain Feed Production and Distribution to Overcome the Great East Japan Earthquake Devastation The Great East Japan Earthquake and tsunami destroyed five major ports and adjacent feed mills on the North-Eastern Pacific coast, the combined production capacity of which amounted to 30 percent of Japan?s total feed production. Japan?s feed industry gathered its strength and overcame this unprecedented crisis by increasing the production in Western Japan and Hokkaido, and transporting feed to unaffected North Western ports by vessel as well as by ground transportation. The affected ports are now open and feed mills are back in operation, although not to the pre-disaster level. On a side note, the post-disaster experience and response to expand capacities in the unaffected regions may accelerate rationalization/consolidation of the feed manufacturing industry in Japan. Table 18. Japan's Livestock Population (1,000 heads) 2000 2006 2007 2008 2009 2010 2011 % change 2011/2000 Dairy cows 1,764 1,636 1,592 1,533 1,500 1,484 1,467 -16.82% Beef cattle 2,824 2,755 2,806 2,890 2,923 2,892 2,763 -2.2% Swine 9,806 9,620 9,759 9,745 9,899 9,750* 9,768 -0.4% Layers 140,365 136,894 142,765 142,523 139,910 139,200* 137,352 2.1% Broilers 108,410 103,687 105,287 102,987 107,141 106,400* NA NA Source: MAFF (as of February each year) * Ag Office Estimate The table above shows the trend in the population of Japan?s major livestock animals. Since the figures are reported as of February, the latest statistics do not reflect the impact of the Great East Earthquake. According to MAFF, damage to the dairy/meat cattle and swine population was negligible, however, approximately 4.5 million birds (broilers and layers combined) died primarily from starvation. This is still a fraction of Japan?s overall broiler/layer population and much of it has reportedly been recovered. Over the last decade, dairy cattle population has declined notably by 17 percent. Utilization Patterns Corn is the largest ingredient used in compound and mixed feed. The ingredient ratio is adjusted from year-to-year, depending on the prices of various grains. The corn ratio of 49 percent, pre-2008 price surge, was lowered to 48 percent in 2009, then to 47 percent in 2010, and with the recent price re-surge, the Japanese feed industry has been forced to once again adjust the ratio down to the 44-45 percent range. (The table below ?Feed Utilization by Ingredients 2010? covers the reporting period of April 2010 to March 2011 and does not reflect the drop in the utilization ratio.) The recent decline in the ratio translates to a roughly 700,000 metric ton reduction in corn demand for feed as Japan?s aggregate feed production is approximated at 24,500,000 metric tons. Table 19-1. Feed Utilization by Ingredients 2010 (MT) Wheat Corn Sorghum Wheat Barley Rice Flour Layer Feed MT 3,303,236 221,705 4,450 2 115,309 3,420 % 52.0% 3.5% 0.1% 0.0% 1.8% 0.1% Broiler Feed MT 1,714,083 583,984 5,832 332 146,529 9,562 % 43.2% 14.7% 0.1% 0.0% 3.7% 0.2% Poultry Total MT 5,017,319 805,689 10,282 334 261,838 12,982 % 48.7% 7.8% 0.1% 0.0% 2.5% 0.1% Dairy Cattle MT 1,337,334 16,340 49,728 49,665 32,694 27,226 % 42.8% 0.5% 1.6% 1.6% 1.0% 0.9% Beef Cattle MT 1,774,071 62,154 54,294 752,334 12,618 42,442 % 39.3% 1.4% 1.2% 16.7% 0.3% 0.9% Cattle Feed Total MT 3,111,405 78,494 104,022 801,999 45,312 69,668 % 40.8% 1.0% 1.4% 10.5% 0.6% 0.9% Swine Feed MT 3,171,566 576,017 99,054 78,718 93,711 50,208 % 52.4% 9.5% 1.6% 1.3% 1.5% 0.8% Feed, other MT 20,027 2,505 180 1,753 267 1,729 % 35.7% 4.5% 0.3% 3.1% 0.5% 3.1% Compound Feed Total MT 11,320,317 1,462,705 213,538 882,804 401,128 134,587 % 47.1% 6.1% 0.9% 3.7% 1.7% 0.6% Mixed Feed MT 295,388 2,165 10,317 18,607 261 769 % 60.4% 0.4% 2.1% 3.8% 0.1% 0.2% Feed Total MT 11,614,834 1,464,181 223,429 901,680 401,463 135,379 % 47.3% 6.0% 0.9% 3.7% 1.6% 0.6% Source: Feed Supply Stabilization Organization Table 19-2. Feed Utilization by Ingredients 2010 (MT) Other Grain Other Rye Oats Grains Total Ingredients Total Layer Feed 0 0 4,404 3,652,526 2,695,100 6,347,626 0.0% 0.0% 0.1% 57.5% 42.5% 100.0% Broiler Feed 11 0 7,472 2,467,805 1,495,751 3,963,556 0.0% 0.0% 0.2% 62.3% 37.7% 100.0% Poultry Total 11 0 11,876 6,120,331 4,190,851 10,311,182 0.0% 0.0% 0.1% 59.4% 40.6% 100.0% Dairy Cattle 17,006 5,208 17,039 1,552,240 1,571,264 3,123,504 0.5% 0.2% 0.5% 49.7% 50.3% 100.0% Beef Cattle 12,135 1,828 17,535 2,729,411 1,781,445 4,510,856 0.3% 0.0% 0.4% 60.5% 39.5% 100.0% Cattle Feed Total 29,141 7,036 34,574 4,281,651 3,352,709 7,634,360 0.4% 0.1% 0.5% 56.1% 43.9% 100.0% Swine Feed 71,977 10 81,854 4,223,115 1,824,084 6,047,199 1.2% 0.0% 1.4% 69.8% 30.2% 100.0% Feed, other 4 1,148 275 27,888 28,242 56,130 0.0% 2.0% 0.5% 49.7% 50.3% 100.0% Compound Feed Total 101,133 8,194 128,579 14,652,985 9,395,886 24,048,871 0.4% 0.0% 0.5% 60.9% 39.1% 100.0% Mixed Feed 3,442 771 15,240 346,960 141,850 488,810 0.7% 0.2% 3.1% 71.0% 29.0% 100.0% Feed Total 103,389 8,851 143,694 14,996,900 9,540,781 24,537,681 0.4% 0.0% 0.6% 61.1% 38.9% 100.0% Source: Feed Supply Stabilization Organization The devastation of north eastern ports and feed milling facilities by the Great East Earthquake resulted in a decline in feed production for several months as shown in the table below. The feed industry consolidated its strength to rev up production in the unaffected regions, and as reconstruction of infrastructure progressed, feed output returned to near normal by fall 2011. Table 20. Japanese Compound and Mixed Feed Production by Type of Animal (1,000 MT) Compound Feed Mixed Grand- Poultry Swine Cattle Subtotal* Feed Total JFY 2005 10,216 5,872 7,376 23,553 556 24,109 JFY 2006 10,301 5,964 7,504 23,863 517 24,381 JFY 2007 10,378 5,911 7,674 24,048 441 24,489 JFY 2008 10,282 6,033 7,761 24,138 360 24,498 JFY 2009 10,344 6,232 7,717 24,347 455 24,803 JFY 2010 10,297 6,041 7,629 24,024 455 24,479 Versus 2010 Apr-11 843 477 671 1,996 31 2,027 93.1% May-11 828 467 597 1,897 26 1,924 97.0% Jun-11 840 490 622 1,956 28 1,984 99.2% Jul-11 772 446 584 1,806 26 1,832 93.0% Aug-11 830 498 641 1,974 28 2,002 105.4% Sep-11 831 507 629 1,970 28 1,998 102.1% Oct-11 861 532 633 2,030 29 2,060 99.2% * Includes feed for other animals ** Ag Office preliminary estimates Source: MAFF Prices The CIF price of U.S. corn which jumped nearly 50 percent in 2008 over 2007 returned to the pre-soaring level in 2009 and remained stable throughout 2010. Fluctuations in U.S. corn prices directly translate to feed prices in Japan as explained in the previous sections. The recent re-surge in corn prices has resulted in a significant price increase of compound feed. (Refer to Chart 6.) As mentioned earlier, this has led to a lowering of the ratio of corn used in compound feed to 44-45 percent. Table 21. Average CIF Price of Corn for Feed by Origin ($US per MT) CY 2009 CY 2010 CY 2011 % change 2011/2009 United States 224.90 238.86 345.56 +44.7% Argentina 248.87 241.21 372.40 +54.4% Brazil 220.74 229.43 337.86 +47.3% Source: Ministry of Finance Trade The 2009 U.S. corn crop suffered from several quality concerns: BCFM (broken kernel, foreign materials), low test weight (low grain density), low protein content, and DON (vomitoxin). This drove Japanese importers to divert supply sources to Brazil and Argentina as depicted in CY 2010 figures in Table 22 below. Although the quick trade statistics report issued by the Ministry of Finance (MOF) shows that total feed corn imports in 2011 were 10,019,602 MT, Post estimates that they were actually higher by around 1 million MT. Food corn imports, on the other hand, should be lowered by 1 million MT to about 4.3 MMT. Historically, MOF has often revised its corn import statistics later in the year. The general trend in recent years is that increases in food corn imports have been compensating for declines in feed corn imports. The driving force in the food corn demand comes from the beverage sector, particularly for high fructose corn syrup (HFCS) used in low alcoholic drinks like happoshu (light beer) and other alcoholic beverages, in addition to a continued strong demand for soft drinks. However, due to general public restraint on holding receptions and parties in the aftermath of the Great East Earthquake, beverage consumption staggered in 2011. According to reports by major brewers, 2011 shipments of beer and related beverages declined 3.7%. The drop in 2011 food corn imports, after Post adjustment, reflects this stagnant beverage consumption in 2011. Table 22. Imports of Corn by Origin (MT) CY 2009 CY 2010 CY 2011 Corn for feed United States 11,066,051 9,792,191 8,773,674 Share 96.1% 87.0% 87.6% Argentina 148,084 610,468 356,691 China 11,241 23,702 0 Brazil 23,532 610,468 749,609 Others 264,033 218,603 139,628 Total 11,512,941 11,255,432 10,019,602 Corn for manufacturing United States 4,655,059 4,583,066 4,993,986 Share 97.4% 94.1% 94.7% Argentina 42,864 211,626 67,115 Australia 197 20 5,632 China 10,271 3 4 South Africa 0 10,000 45,022 Brazil 23,170 39,430 138,252 Others 47,689 25,476 21,332 Total 4,779,250 4,869,621 5,271,343 Total corn United States 15,721,110 14,375,257 13,767,660 Share 96.5% 89.1% 90.0% Total 16,292,191 16,125,053 15,290,945 Source: Ministry of Finance Stocks Japan holds emergency stocks of essential feed grains, i.e. corn, sorghum, and rice. The stock level since 2005 had been set at approximately 950,000 MT in total. The breakdown is 600,000 MT of corn and sorghum combined (roughly 90 percent is corn) and 350,000 MT of rice. The level of corn/sorghum/rice stocks was lowered in 2011 to 750,000 MT (i.e. reduction in corn stocks by 200,000 MT). The stocks were effectively utilized during the post-Great East Earthquake emergency response when all the major North-East ports were shut down. MAFF reports 350,000 MT of grain stocks were released to feed mills in the unaffected regions by the end of April. Given this experience, MAFF is reconsidering what the appropriate level of grain stocks should be. DDGS Imports Leap to a Record High Level One of the positive side-effects of the ethanol boom in the United States is the increasing availability of a high value co- product, Distiller?s Dried Grains with Solubles (DDGS). Japan?s imports of DDGS from the United Sates have been increasing remarkably and surpassed the 100,000 MT mark in 2007, and 275,000 MT in 2009. Following a slight setback in 2010, the demand for DDGS surged further as corn prices jumped. The majority of these DDGS are currently used in dairy cattle feed. Aggressive trade education activities led by the U.S. Grains Council have been behind this notable growth. Commodities: Sorghum Author Defined: SORGHUM Production Like corn, production of sorghum is negligible in Japan. Consumption As sorghum is a substitute for corn, its utilization rate in the production of compound and mixed feeds fluctuates depending on its relative price to corn and other ingredients. Due to a declining price appeal as well as to MAFF?s aggressive promotion of ?rice for feed,? the utilization ratio of sorghum in feed has been declining steadily over the last several years. As described in the WHEAT section, use of wheat in feed wheat expanded significantly this past year, cutting into the share of corn and sorghum in feed to a still small but notable extent. The sorghum utilization ratio went down to 4.6 percent in 2007 from 7.6 percent in 2001, but recovered to 6.9 percent in 2009 due to improved price relative to corn, then down again to 6.0 percent in 2010 and is currently staying at the 6 percent level; Whereas, the ratio of wheat in feed, at a mere 0.7 percent in 2009, is now approaching 2 percent. Prices Just as corn prices did, CIF prices for sorghum rose sharply in 2008, returned to the 2007 level in 2009, remained calm in 2010, then surged again in 2011. Table 23. Average CIF Price of Sorghum for Feed by Origin ($US per MT) % change CY 2009 CY 2010 CY 2011 2011/2009 United States 221.59 244.26 329.25 +48.6% Argentina 170.34 206.56 298.42 +75.2% Australia 208.16 229.63 322.67 +55.0% Source: Ministry of Finance Table 24. Comparative CIF Price; US Sorghum versus Corn ($US per MT) CY 2009 CY 2010 CY 2011 Sorghum 221.59 244.26 329.25 Corn 224.90 238.86 345.56 Sorghum/Corn 98.5% 102.3% 95.3% Source: Ministry of Finance Trade Since sorghum is mainly a substitute crop, potential growth in Japan?s sorghum imports largely depends on its relative price to corn and other feed ingredients. As the U.S. and Argentine sorghum prices soared in 2008, Australia returned as a major supplier in 2008 and further strengthened its position in 2009, lowering the U.S. share to below 23 percent in 2009. With the U.S. prices having stabilized, 2010 imports from the United States recovered in volume and market share, but in 2011, lost its share again to the two competing countries. Imports are classified as being either for feed or food, however, despite this technicality, much of the sorghum imported under the food HS code eventually ends up in the feed sector. Therefore, the volume of sorghum used in feed, shown in Table 19, accurately represents the demand for sorghum in Japan: 1.46 MMT in 2010. Table 25. Imports of Sorghum by Origin (MT) CY 2009 CY 2010 CY 2011 Sorghum for feed United States 348,656 690,688 217,128 Share 23.4% 52.4% 18.2% Argentina 169,658 499,100 459,203 Australia 970,413 128,060 517,322 China 0 0 0 Total 1,492,025 1,318,347 1,193,653 Sorghum, others United States 51,551 121,893 39,644 Share 19.9% 45.6% 19.6% Argentina 51,826 111,910 79,162 Australia 155,002 32,358 82,816 China 190 111 231 Total 258,896 267,072 202,032 Total sorghum United States 400,207 812,581 256,772 Share 22.9% 51.3% 18.4% Total 1,750,921 1,585,419 1,395,685 Source: Ministry of Finance Stocks As written in the previous CORN section, Japan holds emergency stocks of essential feed grains, i.e. corn, sorghum, and rice. The stocks of sorghum had been kept at 130,000-170,000 MT over a decade until 2003. Following the policy of reducing the overall feed grain stocks, sorghum stocks have also shrunk significantly. Post estimates the current stock level to be 50,000 MT or less. Commodities: Barley Author Defined: BARLEY Production The 2011 barley production increased 5 percent. However, the yield was still below average due to continued unfavorable weather conditions, particularly low temperatures in early spring and rain in mid/late spring. Production remains 20 percent smaller in volume than its peak in 2008 despite a 6 percent acreage increase. Table 26. Crop Area and Production of Barley in Japan Crop Area Production (hectares) (1,000 MT) 2007 54,220 194,600 2008 56,650 217,300 2009 57,950 179,200 2010 58,720 161,600 2011 60,130 169,900 Source: MAFF Consumption In Japan, roughly 80 percent of barley is consumed in the feed sector. Barley is used for compound and mixed feed production for the cattle sector (beef and dairy). It is particularly important in feeding beef cattle because it produces high quality beef with the white marbling that Japanese consumers favor. The largest non-feed uses are for the production of shochu, a traditionally distilled liquor, and beer. Other uses include miso (soybean paste) and barley tea. Aggregate consumption of barley (feed and food) is estimated to be 1.5-1.6 million MT. There is little indication that the demand will increase in the near future. On the contrary some decline is expected as Japan?s cattle population shrinks. Prices As in the case with other feed grains, the average CIF price of barley soared in 2007 and 2008. In 2009 it returned to the pre- surge level, remained stable in 2010, and jumped again in 2011. Since no imports from the United States were recorded in 2011, CIF price information is not available. Table 27. Average CIF Prices of Barley for Feed by Origin ($US per MT) CY 2009 CY 2010 CY 2011 % change 2011/2009 United States 203.08 220.55 NA NA Canada 207.67 271.93 313.81 +51.1% Australia 182.03 216.25 320.22 +75.9% Ukraine 202.08 198.16 NA NA Russia 193.65 231.43 302.68 +56.3% Source: Ministry of Finance Trade Along with rice and wheat, barley imports are controlled by MAFF as a ?Staple Food?. MAFF has been hesitant to remove barley from the state trading system entirely because it is a strategic alternative crop under the rice crop diversion program. As described in detail in the WHEAT section, starting April 2007, food barley can be imported under the Simultaneous Buy and Sell (SBS) system. Since 2009, imports from the United States have dropped significantly due to the resurgence of Australia ? which had suffered from drought - as the leading supplier due to its price competitiveness and proximity to Japan?s major barley importing port in Kyushu. Table 28. Imports of Barley by Origin (MT) CY 2009 CY 2010 CY 2011 Barley for feed United States 26,598 35,214 0 Share 2.3% 3.0% 0.0% Canada 198,589 148,756 376,871 Australia 697,162 917,910 710,193 Ukraine 159,160 70,710 0 Russia 58,197 2,002 2,642 Others 8,172 8,185 0 Total 1,147,878 1,182,777 1,089,706 Barley, others United States 1,117 837 865 Share 0.5% 0.4% 0.4% Canada 66,760 61,880 37,041 Australia 169,005 166,629 180,781 Others 5,623 5,763 4,449 Total 242,505 235,109 223,136 Total Barley United States 27,715 36,051 865 Share 2.0% 2.5% 0.1% Total 1,390,383 1,417,886 1,312,842 Source: Ministry of Finance SBS Tender for Feed Barley MAFF introduced the SBS system for barley for feed in JFY 1999 with approximately 360,000 MT contracted under three tenders. The allocation amount has been greatly raised since then, and for the Japanese fiscal year 2011, is set at 1.41 million MT. The frequency of bidding has been raised from ten in 2008 to fourteen in 2009, and to almost biweekly in 2010 to allow for more commercially viable trade. So far, this fiscal year, forty-one tenders have been held as summarized below. Table 29. SBS Imports of Feed Wheat and Barley (MT) Wheat Barley 1st tender 23,220 63,715 2nd 0 0 3rd 0 0 4th 0 0 5th 6,100 102,600 6th 0 5,200 7th 0 0 8th 0 0 9th 1,150 7,250 10th 42,480 0 11th 0 0 12th 12,000 95,400 13th 0 0 14th 0 0 15th 0 0 16th 0 0 17th 33,700 81,050 18th 0 0 19th 14,750 0 20th 700 0 21th 700 0 22nd 10,600 100,900 23rd 1,000 0 24th 49,600 50,340 25th 5,600 0 26th 0 0 27th 0 0 28th 12,350 0 29th 0 17,540 30th 16,000 111,250 31th 63,280 90,360 32nd 11,000 0 33rd 0 17,500 34th 48,965 5,357 35th 0 0 36th 21,900 102,150 37th 800 0 38th 0 0 39th 0 0 40th 0 0 41st 3,000 48,245 Total 378,895 898,857 Source: MAFF As of February 8, 2012 New SBS Tender for Food Barley As reported in the WHEAT section in detail, MAFF started a new Simultaneous-Buy-Sell (SBS) system for food quality wheat and barley in Japan?s fiscal year (JFY) 2007 beginning April 2007. The idea behind the SBS system is to allow for greater flexibility of imports and transparency so that traders/users can obtain the quality and quantity they desire in a system that resembles commercial trade. Since Japanese fiscal year (JFY) 2008, all of food use barley has been imported under the SBS regime. Plans for Barley SBS Tenders: Annual imports of food barley have been around 240,000 MT: roughly 170,000 MT from Australia for shochu, a distilled liquor, and beer; 60,000 from Canada for beer and barley tea; and a few hundred tons from the United States mainly for beer. Post estimates 195,000-200,000 MT are intended for shochu, 40,000-45,000 MT for beer, and 5,000 MT for barley tea. As with wheat there are two categories for barley. Category I is for vessel trade. Although most barley is imported by vessel, there is also Category II for container units. Category II provides a means for new varieties to enter the market. Table 30. SBS Imports of Food Barley - Japan Fiscal Year 2009 (April 2009-March 2010) (MT) Country Category Apr-Sept Oct-Mar Total Australia Category I 76,000 89,000 165,000 Category II 3,260 0 3,260 Australia Total 79,260 89,000 168,260 Canada Category I 41,900 18,700 60,600 Category II 100 992 1,092 Canada Total 42,000 19,692 61,692 USA Category I 0 0 0 Category II 315 0 315 USA Total 315 0 315 Other Category I 0 0 0 Category II 3,226 4,476 7,702 Total 124,801 113,168 237,969 Source: MAFF Stocks Japan used to hold 350,000 MT of emergency barley stocks, but since 2006 they have been replaced by rice stocks. Since practically all of feed barley Japan needs can be imported through the SBS tenders with an ample allocation (1.41 million MT), MAFF explains that government-held emergency stocks are no longer necessary. Commodities: Rye Author Defined: RYE Production Production of rye is minimal in Japan. Consumption Rye is almost exclusively used for feed in Japan. The main uses of rye are for cattle feed and swine feed. Like sorghum, most rye users consider it as substitute mainly for corn. Since there is practically no domestic production, annual rye consumption and imports are directly linked with domestic cattle and swine production, and prices of corn and other feed grains. In 2010, the latest statistics available (Table 19), total rye utilization in feed was 103,389 MT: 17,006 for dairy cattle; 12,135 MT for beef cattle; and 71,977 MT for swine. The ratio of rye in compound and mixed feed had been declining in the last several years due to declining price competitiveness, and the total utilization went down significantly from 150,000 MT in 2007 to 54,000 MT in 2009 because of the fall in imports from Germany as explained in the following trade section. With the price having stabilized since 2009, the utilization of rye in feed has picked up in 2010 as reflected in increased imports. However, as the prices rose again in 2011, Post forecasts that use of rye in feed will show a decline once again. Prices As shown below, U.S. rye is significantly less price competitive than that of Germany or Canada, the two major suppliers for Japan. The price of German rye soared in 2008 due to a fervent demand in the EU caused by poor Russian and Ukraine crops, but it returned to the pre-surge level in 2009, stayed relatively flat in 2010, and soared again in 2011. Table 31. Average CIF Price of Rye by Origin ($US per MT) CY 2009 CY 2010 CY 2011 % change 2011/2009 United States 906.82 629.74 829.17 -8.6% Canada 238.23 235.11 337.26 +41.6% Germany 226.95 234.85 544.24 +139.8% Poland 222.53 255.04 224.45 +0.9% Source: Ministry of Finance Trade Germany had dominated rye exports to the Japanese market because of its price competitiveness. Imports from Germany declined dramatically, from 154,000 MT in 2007 to 5,000 MT in 2008, due to the price situation as explained above. Although the price situation improved in 2009, imports did not fully recover in 2009 mainly because sorghum became more attractive. In 2010, as the rye/sorghum price ratio moved in favor of rye, imports of rye recovered to the 100,000 MT mark. In 2011, as the price of German rye more than doubled over the 2010 level, Canada has taken over the leading exporter position. In the medium term, rye imports are expected to be on a declining trend as Japan?s cattle and swine populations will likely shrink. Prospects for U.S. rye exports to Japan are directly linked to the relative price of U.S. rye. Table 32 Imports of Rye by Origin (MT) CY 2009 CY 2010 CY 2011 United States 640 1,267 1,014 Canada 13,761 21,404 71,162 Germany 44,717 56,603 1,349 Poland 5,548 40,128 13,975 Other 23 55 48 Total 64,689 119,457 87,548 Source: Ministry of Finance Stocks Unlike corn, sorghum and barley, Japan does not hold strategic emergency stocks of rye. Commercial stocks are estimated to be smaller than 20,000 MT. Commodities: Select Author Defined: Appendix: Japan?s Food Self-Sufficiency Table 33. Japan?s Self-sufficiency Ratio (%) 1960 1975 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010* Rice 96 110 107 100 104 95 95 94 94 95 95 97 Wheat 28 4 14 15 7 11 14 13 14 14 11 9 Beans 25 9 8 8 5 7 7 7 7 9 8 8 Soybeans 11 4 5 5 2 5 5 5 5 6 6 6 Vegetables 100 99 95 91 85 82 79 79 81 82 83 81 Fruit 90 84 77 63 49 44 41 38 40 41 42 38 Meats 90 77 81 70 57 52 54 56 56 56 57 56 Beef 95 81 72 51 39 34 43 43 43 44 43 42 Eggs 100 97 98 98 96 95 94 95 96 96 96 96 Milk/Dairy Products 86 81 85 78 72 68 68 67 66 70 71 67 Seafood (for humans) 110 100 86 72 57 53 57 60 62 62 62 60 Sugar 31 15 33 32 31 29 34 32 33 38 33 26 Self-sufficiency (Calorie Basis) 73 54 53 48 43 40 40 39 40 41 40 39 Self-sufficiency (Major Food Grains) 80 69 69 67 65 60 61 60 60 61 58 59 Self-sufficiency (Major Feed Grains) 55 34 27 26 26 26 25 25 25 26 25 25 Self-sufficiency (Food + Feed Grains) 62 40 31 30 30 28 28 27 28 28 26 27 Source: MAFF * Preliminary Production, Supply and Demand Statistics Rice, Milled Japan 2010/2011 2011/2012 2012/2013 Market Year Begin: Nov 2010 Market Year Begin: Nov 2011 Market Year Begin: Nov 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 1,628 1,628 1,576 1,576 1,550 Beginning Stocks 2,693 2,693 2,788 2,713 2,810 Milled Production 7,720 7,720 7,646 7,646 7,358 Rough Production 10,604 10,604 10,503 10,503 10,107 Milling Rate (.9999) 7,280 7,280 7,280 7,280 7,280 MY Imports 700 700 700 700 700 TY Imports 700 700 700 700 700 TY Imp. from U.S. 0 350 0 350 350 Total Supply 11,113 11,113 11,134 11,059 10,868 MY Exports 200 200 150 200 200 TY Exports 200 200 150 200 200 Consumption and Residual 8,125 8,200 8,250 8,049 7,967 Ending Stocks 2,788 2,713 2,734 2,810 2,701 Total Distribution 11,113 11,113 11,134 11,059 10,868 1000 HA, 1000 MT, MT/HA Wheat Japan 2010/2011 2011/2012 2012/2013 Market Year Begin: Jul 2010 Market Year Begin: May 2011 Market Year Begin: Jul 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 207 207 208 212 210 Beginning Stocks 1,312 1,312 1,357 964 1,066 Production 568 568 760 742 750 MY Imports 5,869 5,628 6,100 5,800 5,500 TY Imports 5,869 5,628 6,100 5,800 5,500 TY Imp. from U.S. 3,598 3,293 0 3,500 3,300 Total Supply 7,749 7,508 8,217 7,506 7,316 MY Exports 292 264 300 300 300 TY Exports 292 264 300 300 300 Feed and Residual 300 300 600 400 300 FSI Consumption 5,800 5,980 5,850 5,740 5,700 Total Consumption 6,100 6,280 6,450 6,140 6,000 Ending Stocks 1,357 964 1,467 1,066 1,016 Total Distribution 7,749 7,508 8,217 7,506 7,316 1000 HA, 1000 MT, MT/HA Corn Japan 2010/2011 2011/2012 2012/2013 Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 Market Year Begin: Oct 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 1 1 1 1 1 Beginning Stocks 678 678 734 633 684 Production 1 1 1 1 1 MY Imports 15,655 15,654 16,100 15,500 16,000 TY Imports 15,655 15,654 16,100 15,500 16,000 TY Imp. from U.S. 13,863 14,525 0 15,000 15,500 Total Supply 16,334 16,333 16,835 16,134 16,685 MY Exports 0 0 0 0 0 TY Exports 0 0 0 0 0 Feed and Residual 11,000 11,200 11,500 11,000 11,500 FSI Consumption 4,600 4,500 4,600 4,450 4,500 Total Consumption 15,600 15,700 16,100 15,450 16,000 Ending Stocks 734 633 735 684 685 Total Distribution 16,334 16,333 16,835 16,134 16,685 1000 HA, 1000 MT, MT/HA Sorghum Japan 2010/2011 2011/2012 2012/2013 Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 Market Year Begin: Oct 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 0 0 0 0 0 Beginning Stocks 117 117 115 75 75 Production 0 0 0 0 0 MY Imports 1,418 1,418 1,500 1,400 1,450 TY Imports 1,418 1,418 1,500 1,400 1,450 TY Imp. from U.S. 328 315 0 250 500 Total Supply 1,535 1,535 1,615 1,475 1,525 MY Exports 0 0 0 0 0 TY Exports 0 0 0 0 0 Feed and Residual 1,420 1,460 1,500 1,400 1,450 FSI Consumption 0 0 0 0 0 Total Consumption 1,420 1,460 1,500 1,400 1,450 Ending Stocks 115 75 115 75 75 Total Distribution 1,535 1,535 1,615 1,475 1,525 1000 HA, 1000 MT, MT/HA Barley Japan 2010/2011 2011/2012 2012/2013 Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 Market Year Begin: Oct 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 59 59 58 60 58 Beginning Stocks 489 489 462 461 401 Production 162 162 174 170 180 MY Imports 1,361 1,360 1,300 1,280 1,260 TY Imports 1,361 1,360 1,300 1,280 1,260 TY Imp. from U.S. 2 9 0 2 50 Total Supply 2,012 2,011 1,936 1,911 1,841 MY Exports 0 0 0 0 0 TY Exports 0 0 0 0 0 Feed and Residual 1,250 1,250 1,225 1,230 1,220 FSI Consumption 300 300 300 280 280 Total Consumption 1,550 1,550 1,525 1,510 1,500 Ending Stocks 462 461 411 401 341 Total Distribution 2,012 2,011 1,936 1,911 1,841 1000 HA, 1000 MT, MT/HA Rye Japan 2010/2011 2011/2012 2012/2013 Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 Market Year Begin: Oct 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 0 0 0 0 0 Beginning Stocks 18 18 19 13 13 Production 0 0 0 0 0 MY Imports 101 100 75 80 90 TY Imports 101 100 75 80 90 TY Imp. from U.S. 0 1 0 1 1 Total Supply 119 118 94 93 103 MY Exports 0 0 0 0 0 TY Exports 0 0 0 0 0 Feed and Residual 90 95 65 70 80 FSI Consumption 10 10 10 10 10 Total Consumption 100 105 75 80 90 Ending Stocks 19 13 19 13 13 Total Distribution 119 118 94 93 103 1000 HA, 1000 MT, MT/HA
Posted: 24 March 2012

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