Required Report - public distribution

**Date:** 3/11/2009

**GAIN Report Number:** JA9022

JA9022

**Japan**

**Grain and Feed**

**Grain and Feed Annual Report**

**2009**

**Approved by:**

![](media/image1.wmf)Deanna Ayala

U.S. Embassy

**Prepared by:**

Hisao Fukuda

**Report Highlights:**

Although Japan\'s likely economic contraction will lead to a decline in
its purchasing power in 2009, food demand in Japan has demonstrated one
of world\'s most inelastic and stable trends. The strengthened yen and a
desire for cheaper food alternatives may well drive up imports. The
recent grain price situation has caused tremendous hardship for Japan\'s
livestock producers, resulting in a notably accelerated contraction in
some sectors like dairy. However, overall feed grain demand has remained
robust. The Government of Japan has capitalized on the volatile world
food supply situation to aggressively promote self-sufficiency.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Tokyo \[JA1\]

\[JA\]

Table of Contents

[IMPACT OF THE CURRENT ECONOMIC CRISIS
4](#impact-of-the-current-economic-crisis)

[IMPACT OF THE RECENT GRAIN PRICE VOLATILITY
6](#impact-of-the-recent-grain-price-volatility)

[COMMODITY SPECIFIC REPORT 8](#commodity-specific-report)

[RICE 8](#rice)

[Tainted Rice Shakes the Whole Nation and MAFF
8](#tainted-rice-shakes-the-whole-nation-and-maff)

[Production up 1 Percent, thus Surplus Continues
9](#production-up-1-percent-thus-surplus-continues)

[Consumption on Upturn but Long-term Prospects Not Perky
9](#consumption-on-upturn-but-long-term-prospects-not-perky)

[Government Set-aside Program Planned Again This Year
12](#government-set-aside-program-planned-again-this-year)

[Japan Fails to Meet Import Commitment in 2007
13](#japan-fails-to-meet-import-commitment-in-2007)

[Trade for Processed Rice Products
15](#trade-for-processed-rice-products)

[Stocks 16](#stocks)

[Minimum Access Commitment Continues into 2007
17](#minimum-access-commitment-continues-into-2007)

[Export of Rice under Food Aid 17](#export-of-rice-under-food-aid)

[WHEAT 18](#wheat)

[Production in 2008 Declines 3 Percent
18](#production-in-2008-declines-3-percent)

[Wheat Consumption Stays Flat 18](#wheat-consumption-stays-flat)

[Utilization Patterns 18](#utilization-patterns)

[Wheat Resale Price Significantly Raised
19](#wheat-resale-price-significantly-raised)

[Wheat Imports Show Increase in 2008
21](#wheat-imports-show-increase-in-2008)

[Stocks 22](#stocks-1)

[Feed Wheat Imports through SBS System
22](#feed-wheat-imports-through-sbs-system)

[MAFF Introduces New SBS System for Food Quality Wheat and Barley
23](#maff-introduces-new-sbs-system-for-food-quality-wheat-and-barley)

[CORN 25](#corn)

[Production 25](#production)

[Overall Demand Stable While High Feed Price Will Severely Hurt Japanese
Livestock Producers
25](#overall-demand-stable-while-high-feed-price-will-severely-hurt-japanese-livestock-producers)

[Utilization Patterns 27](#utilization-patterns-1)

[Prices 29](#prices)

[Trade 29](#trade)

[Stocks 30](#stocks-2)

[SORGHUM 32](#sorghum)

[Production 32](#production-1)

[Consumption 32](#consumption)

[Prices 32](#prices-1)

[Trade 32](#trade-1)

[Stocks 33](#stocks-3)

[BARLEY 34](#barley)

[Production 34](#production-2)

[Consumption 34](#consumption-1)

[Prices 34](#prices-2)

[Trade 35](#trade-2)

[SBS Tender for Feed Barley 35](#sbs-tender-for-feed-barley)

[New SBS Tender for Food Barley 36](#new-sbs-tender-for-food-barley)

[Stocks 37](#stocks-4)

[RYE 38](#rye)

[Production 38](#production-3)

[Consumption 38](#consumption-2)

[Prices 38](#prices-3)

[Trade 38](#trade-3)

[Stocks 39](#stocks-5)

[BEANS 40](#beans)

[Production 40](#production-4)

[Consumption 40](#consumption-3)

[Trade 40](#trade-4)

[Policy 42](#policy)

[PS&D 43](#psd-1)

[Rice PS&D Table 43](#rice-psd-table)

[WHEAT PS&D 44](#wheat-psd)

[Corn PS&D Table 45](#corn-psd-table)

[Sorghum PS&D Table 46](#sorghum-psd-table)

[Barley PS&D Table 47](#barley-psd-table)

[Rye PS&D Table 48](#rye-psd-table)

# IMPACT OF THE CURRENT ECONOMIC CRISIS

Many analysts initially believed that because Japan was largely
insulated from the impact of the mortgage crisis in the United States,
the impact on Japan's economy from the crisis would be limited. However,
as the prospects of the U.S. economy get gloomier, the Japanese economy
is being dragged into a recession. With many of Japan's top companies
like Toyota and Sony laying off tens of thousands of workers, the
unemployment rate has surpassed 4.4% (as of January 2009). It is now
clear that Japan's purchase power will weaken in 2009.

It is important to separate the financial crisis from Japan's current
economic downturn. The first is exogenous and Japan's financial firms
are essentially insulated from the repercussions of toxic mortgages and
counterparty risk. However, Japan's sagging economy is due in large part
to slowing U.S. demand for Japan's exports. On February 25 Japan's
Ministry of Finance released data showing that exports in January 2009
dropped by 45.7 percent compared to January 2008. The U.S. economic slow
down has started showing a seriously negative knock-on effect on an
economy that showed a 3.3 percent decline in GDP for the
October-December 2008 period (12.7 percent on an annualized basis). Most
analysts believe Japan's economy is heading into a severe contraction in
2009. While the yen has strengthened against the dollar; this tailwind
for importers is not going to be enough to offset the effect on
consumption-led growth.

The Government of Japan (GOJ) approved a 1.8 trillion yen economic
stimulus package in September 2008, of which 139 billion yen is
earmarked for measures to alleviate the impact of higher energy and food
prices on households. Further, the GOJ pushed a second supplemental
budget of 4.7 trillion yen through the Diet on March 4. This includes a
direct payment of some 150 dollars to every citizen. Many analysts,
however, are skeptical that the recipients of this direct payment will
actually spend it because when economic prospects are uncertain,
Japanese people tend to save.

Looking at the micro economic picture, food consumption in Japan is
relatively inelastic, 0.293 according to an Economic Research Service
study (<http://www.ers.usda.gov/Data/InternationalFoodDemand/>). (NB: In
the same study the only countries with lower income elasticity for food
were: Barbados, Bermuda, Canada, Denmark, Hong Kong, Iceland, Luxemburg,
Switzerland, and the United States.) Overall, food consumption will
remain stable although eating patterns will likely change. Staples
should remain about the same, but luxury products and discretionary
purchasing are expected to decline. Consumers are scaling down
restaurant dining in favor of more cost effective dinners at home. A
shrink in corporate entertainment expenditures will also mean tougher
times for the food service industry.

As consumers seek value and cheaper basic foodstuffs one can expect to
see a positive impact on U.S. exports of meats, some horticultural
products and most grains. The downturn in commodity prices, coupled with
the strengthened yen, should help Japan to maintain or even increase its
food and feed grain imports from the United States in 2009.

With respect to domestic production patterns, Post does not anticipate
major fluctuations due to the current economic situation. One major
reason is that the one crop in which Japan is self-sufficient, rice, is
highly protected from the international market and hence neither the
international price nor the international economy affects production.
Domestic production of biofuels is minor and mostly in the R&D phase. If
research funding shrinks, the biofuels projects underway might be
affected but there would be little to no impact outside of Japan from
this development.

From Post's view, the most notable impact the financial crisis is having
on agriculture is the impetus that it is giving to promote domestic food
self-sufficiency. As mentioned below, the recent volatility in grain
prices had already given a tremendous amount of fuel for the GOJ
campaign to sway the public to the idea of increased self-sufficiency.
When the economy goes sour, there is a tendency for the Japanese public
to become more conservative not only in their purchasing behavior but
also in their social attitude due to anxiety about the future.

# 

**Chart 1.**

![](media/image2.wmf){width="6.492361111111111in"
height="3.2180555555555554in"}

Source: Ministry of Management, Home Affairs, Post and
Telecommunications

# IMPACT OF THE RECENT GRAIN PRICE VOLATILITY

Over the last year and a half the Japanese media have played up Japan's
vulnerability and the insecurity of depending too heavily on food
imports, focusing on the possibility of food shortages due to climate
change, spiking fuel and food prices and a surging demand for cereal
grains and other food from developing countries like China and India.
The media and some politicians have also criticized the U.S. ethanol
policy for causing the grain price spikes. It is interesting to note
that they have labeled grain price volatility and the current economic
crisis both as problems "made in the U.S.A."

Notable impacts are seen in the following three areas:

1\) Food corn turns to biotech

Japan's food corn imports are predominantly absorbed by starch
manufacturers. Under the recent supply and price situation, they have
made a decision to reevaluate their decade-long practice of only using
identity-preserved (IP) handled non-biotech corn. In April 2008, Japan's
major corn starch processors announced that they would use biotech corn.
Although there are no official government or industry statistics, Post
estimates that imports of biotech corn for food use went from near zero
to almost a million metric tons in 2008.

2\) MAFF embarks on a full-blown PR campaign to raise self-sufficiency

The government budget crunch in Japan has forced every ministry to
shrink overall spending by a few percentage points every year over the
last several years. MAFF is no exception. MAFF's budget for the Japanese
fiscal year (JFY) 2008 took another two percent cut to 2,627 billion
yen. However, while most budget lines saw cuts, MAFF created a new
budget line item entitled "self-sufficiency strategic PR" and was able
to obtain 1.7 billion yen (about 19 million dollars) funding. The pivot
of this self-sufficiency promotion program is a campaign entitled "Food
Action Nippon" whose main pillar is the website
<http://www.syokuryo.jp/> introducing and linking various activities.
The most interesting feature of the website is that it mimics a social
networking site where one becomes a member and introduces one's friends,
creating a network of supporters. Numerous celebrity supporters are
listed, ranging from actors and chefs to Olympic athletes. If a company
wishes to support the campaign, it can do so by submitting an
application on or off line and once approved, it can use the campaign
logo in its PR/advertising activities.

3\) And Japan's critical industry, rice, is a focal point

Raising Japan's food self-sufficiency cannot be discussed without rice.
MAFF's current target is to raise the calorie-based self-sufficiency
ratio to 45 percent by 2015. In the current discussion to design a
medium term strategy for Japan's agriculture, MAFF is proposing an
ambitious goal of 50 percent. Here is the roadmap MAFF presented in
December 2008.

In ten years (the base year being 2007),

-   Increase per capita rice consumption from 61 KG to 63 KG;

-   Increase rice flour production from 10,000 MT to 500,000 MT;

-   Increase feed rice production from 0 to 260,000 MT;

-   Increase wheat production from 910,000 MT to 1.8 MMT; and

-   Increase soybean production from 230,000 MT to 500,000 MT.

> Note that most of wheat and soybeans are grown on rice paddies.
> Therefore, all of the above are about rice paddy utilization.

-   Increase vegetable production from 1.242 MMT to 1.422 MMT;

-   Increase milk and dairy product production from 802,000 MT to
    928,000 MT;

-   Reduce per capita fat consumption from 14 KG to 12 KG;

-   Reduce daily calorie intake from 2,551 kcal to 2,480 kcal.

**Table 1**.

  ------------------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ --------
  ***Japan\'s                                                                                                   
  Self-Sufficiency                                                                                              
  Ratio (%)***                                                                                                  

                     1960   1975   1985   1990   1998   1999   2000   2001   2002   2003   2004   2005   2006   2007\*

  Rice               96     110    107    100    95     95     95     95     96     95     95     95     94     94

  Wheat              28     4      14     15     9      9      11     11     13     14     14     14     13     14

  Beans              25     9      8      8      5      6      7      7      7      6      6      7      7      7

  Soybeans           11     4      5      5      3      4      5      5      5      4      3      5      5      5

  Vegetables         100    99     95     91     84     83     82     82     83     82     80     79     79     81

  Fruit              90     84     77     63     49     49     44     45     44     44     40     41     38     41

  Meats              90     77     81     70     55     54     52     53     53     54     55     54     56     56

  Beef               95     81     72     51     35     36     34     36     39     39     44     43     43     43

  Eggs               100    97     98     98     96     96     95     96     96     96     95     94     95     96

  Milk/Dairy         86     81     85     78     71     70     68     68     69     69     67     68     67     66
  Products                                                                                                      

  Seafood (for food) 110    100    86     72     57     55     53     53     53     57     55     57     60     62

  Sugar              31     15     33     32     32     31     29     32     34     35     34     34     32     33

  Self-sufficiency                                                                                               

  (Calorie Basis)    73     54     53     48     40     40     40     40     40     40     40     40     39     40

  Self-sufficiency                                                                                               

  (Major Food        80     69     69     67     59     59     60     60     61     60     60     61     60     60
  Grains)                                                                                                       

  Self-sufficiency                                                                                               

  (Major Feed        55     34     27     26     25     24     26     25     25     23     25     25     25     25
  Grains)                                                                                                       

  Self-sufficiency                                                                                               

  (Food + Feed       62     40     31     30     27     27     28     28     28     27     28     28     27     28
  Grains)                                                                                                       

  Source: MAFF                                                                                                  

  \* Preliminary                                                                                                
  ------------------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ --------

**Chart 2.**

![](media/image3.wmf){width="4.999305555555556in"
height="3.0076388888888888in"}

# COMMODITY SPECIFIC REPORT

# RICE

## Tainted Rice Shakes the Whole Nation and MAFF

On September 5, 2008, a whistle blower unveiled that Mikasa Foods, an
Osaka-based food processing company, had been fraudulently selling so
called "incident rice" designated for non-human consumption to food
processing and foodservice users since 2003 and perhaps longer.
"Incident rice" is the term the Ministry of Agriculture (MAFF) uses for
the rice, stored in government warehouses, whose quality is deemed
unsuitable for human consumption due to pesticide residues exceeding the
regulatory limits or to quality deterioration like mold. Since most of
the government stocks of rice are imported under Japan's Uruguay Round
Minimum Access (MA) commitment, to the rice industry "incident rice"
generally refers to MA rice disqualified for human consumption. At the
time MAFF allowed incident rice or what the media now calls "tainted
rice" to be sold only for industrial uses such as glue manufacturing.

According to MAFF's records, Mikasa had bought some 1,800 metric tons of
tainted rice from MAFF since 2003 and sold most of it to over 390
companies which then used it to make products for human consumption.
These companies claim that they did not know the rice was tainted. The
list of purchasers includes sake breweries, confectionery manufacturers,
and even foodservice companies catering to day care centers and
kindergartens.

There was actually suspicion of Mikasa'a fraudulent activity more than a
year ago and MAFF officials had inspected Mikasa almost a hundred times
since the first whistle blowing but found no wrongdoing. New findings of
other companies' involvement in similar activities kept surfacing and
made the front page of the newspapers daily. This so-called "tainted
rice incident" became MAFF's biggest crisis since BSE was discovered in
Japan in 2001.

The media portrayed the problem -- which was essentially a case of
fraudulent activities by Japanese companies and lack of oversight by
Japanese government agencies -- as a food safety issue. This was despite
a public acknowledgement of wrongdoing by the company. Although some of
the rice in question was found to exceed the maximum pesticide residue
standards, it is highly unlikely, as the Ministry of Health says, that
once processed into sake and rice crackers, it affects human health. In
fact, no illnesses have been reported. (*Note that the rice that was
found to exceed the MRLs fully met the residue standard at the time of
import. Because MHLW introduced the MRL system in 2006, the rice
imported prior was tested against the new standard and a fraction of it
failed to meet the new standard.*) Most of the first reports in the
media mentioned that the tainted rice was imported, thus branding it not
only a food safety issue but an *imported* food safety issue. Some
reports said, "Why do we have to import poisonous rice and spend
tax-payers money to keep it," totaling ignoring the fact that imported
rice goes through rigorous maximum residue level (MRL) testing, which
exceeds the requirements to which domestic Japanese rice is subjected.

Most of the rice that went into the incident rice channel was
disqualified due to molding from having been kept in the MAFF warehouse
for so long and/or from being exposed to water. It is true that the
Government of Japan spends an inordinate amount of money to import,
store, and sell at a loss the rice it imports. However, there are many
options available to relieve that burden including releasing the rice
into the regular table rice market regularly. As a result of such
misunderstandings by the media and the resulting effect on public
opinion there came calls for MAFF to implement additional measures
against imported rice. In the end, the purchase contract between
importers and MAFF was revised so that importers must now ship back to
exporting countries or dispose of rice disqualified at the port of
entry. Since wheat is also a state-traded commodity, MAFF also revised
the contract terms of wheat imports with importers in the same manner,
causing disruption of trade in the last quarter of 2008 during
transition from the previous contract.

## Production up 1 Percent, thus Surplus Continues 

Without any major weather disruptions, overall national production ended
at one percent above a normal year for the total volume of 8,823,000
metric tons (MT), brown rice basis. This is greater than the demand
forecast of 8,550,000 MT

**Table 2.**

  ------------- ----------- -- ------- -- -------- ------------ -- ------- -- -------- ------------- -- --------
  ***Japan\'s                                                                                           
  Rice                                                                                                  
  Production                                                                                            
  (Brown                                                                                                
  Basis)***                                                                                             

                                                                                                        

                Planted                            Production                          Yield/10 ares    
                Area (1,000                        (1,000                              (kilograms)      
                hectares)                          metric tons)                                         

                Total          Paddy      Upland   Total           Paddy      Upland   Paddy            Upland

  2004          1,701          1,697      4        8,730           8,721      9        514              200

  2005          1,706          1,702      4        9,074           9,062      12       532              266

  2006          1,688          1,684      4        8,556           8,546      10       507              246

  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

  Source: MAFF                                                                                          
  ------------- ----------- -- ------- -- -------- ------------ -- ------- -- -------- ------------- -- --------

## 

## Consumption on Upturn but Long-term Prospects Not Perky 

Per capita consumption of rice in Japan has been showing a slight upturn
since 2007. This is attributed mainly to the relatively low price of
rice when most food items, particularly other carbohydrate options like
wheat based products, increased in price as shown in Chart 4 below.
MAFF's extravagant "self-sufficiency" campaign whose core program is
promoting rice consumption also might have helped. MAFF has also 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 3): the reason for
the increase in total consumption shown in the PS&D. On the table rice
side, however, it would be optimistic to conclude that the
four-decade-long downward trend has been reversed. On the contrary, Post
projects a further decline in the next decade, given the demographic
situation depicted in Chart 6 where Japan's population peaked in 2005,
faster than previously forecast, and the population is also aging
rapidly (one out of four Japanese will be older than 65 by 2015).

**Table 3.**

  ---------------- -------- ------- ------- ------- ------- -------- ------- --------
  ***Annual Per                                                              
  Capita                                                                     
  Consumption of                                                             
  Rice in Japan                                                              
  (Kilograms)***                                                             

                                                                             

  1962             1965     1975    1985    1995    2005    2006     2007    2008\*

  118.3            111.7    88.0    74.6    67.8    61.4    61.0     61.4    61.5

  \* Ag Office                                                               
  estimate                                                                   

  Source: MAFF                                                               
  ---------------- -------- ------- ------- ------- ------- -------- ------- --------

**Chart 3.**

![](media/image4.wmf){width="5.78125in" height="3.6979166666666665in"}

Source: Ministry of Finance

**Chart 4.**

![](media/image5.wmf){width="6.493055555555555in"
height="3.3368055555555554in"}

Source: Ministry of Management, Home Affairs, Post and
Telecommunications

**Chart 5.**

![](media/image6.wmf){width="6.499305555555556in"
height="3.533333333333333in"}

Source: Ministry of Management, Home Affairs, Post and
Telecommunications

**Chart 6.**

![](media/image7.wmf){width="6.0in" height="3.6979166666666665in"}

Source: Compiled by AgAffairs/Tokyo based on the statistics of the
Ministry of Health, Labor and Welfare

and National Institute of Population and Social Security Research

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 less than four percent of food expenditures on
rice.

**Table 4.**

  -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
  ***Average Monthly                                                                                             
  Expenditures on Rice                                                                                           
  by Japanese                                                                                                    
  Household (in                                                                                                  
  Yen)***                                                                                                        

                                                                                                                 

                       1985      2000      2001      2002      2003      2004      2005      2006      2007      2008

  Total                273,114   317,133   308,692   306,129   302,623   304,203   302,903   295,332   297,139   297,102

  Expenditure                                                                                                     

  Food                 73,735    73,844    71,534    71,286    70,260    70,116    68,910    68,178    68,522    69,145

  Expenditure                                                                                                     

  Expenditure          6,233     3,291     3,113     2,992     3,041     3,044     2,681     2,523     2,506     2,515

  on Rice                                                                                                         

  \% rice/food         8.50%     4.50%     4.40%     4.20%     4.30%     4.34%     3.89%     3.70%     3.66%     3.64%

  Source: Ministry of                                                                                            
  Management, Home                                                                                               
  Affairs, Post and                                                                                              
  Telecommunications                                                                                             
  -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------

## 

## Government Set-aside Program Planned Again This Year 

The graphs below show the trend in the wholesale traded price of rice
and the retail price for 2007 crop and 2008 crop thus far. With early
indications of the new 2008 crop at above normal year volume, MAFF
quickly announced that it would buy 100,000 MT to segregate part of the
surplus. In a further effort to sustain the price level, Japan's
national farm cooperative (JA) did not supply its rice to market
auctions until late January and had pre-negotiated wholesale prices with
major distributors. As a result, the 2008 crop is showing a higher price
level than last year. (Please refer to the following price section.)
Some trade people are criticizing JA for price rigging, which has made
the rice auction market dysfunctional.

**Chart 7.**

![](media/image8.wmf){width="5.78125in" height="3.3125in"}

Source: MAFF

**Chart 8.**

![](media/image9.wmf){width="5.78125in" height="3.3125in"}

Source: MAFF

## 

## Japan Fails to Meet Import Commitment in 2007

For the first time since it implementation in 1995, Japan failed to meet
its WTO minimum access commitment of rice imports. Out of the committed
volume of 682,000 MT, approximately 65,000 MT were left unfilled. The
"tainted rice incident" also disrupted the 2008 tenders because MAFF
decided to revise the terms of the import contract. (Please refer to the
beginning of the Rice Section.) This resulted in a delay of tender
implementation, particularly SBS tenders. As of the end of February,
only two-thirds of the commitment volume has been filled.

**Table 5.**

  ------------------------ --------- ---------- ----------- --------- --------------- ----------
  ***Results of Japan\'s                                              ***(JFY         
  Minimum Access Rice                                                 1995-2008)***   
  Tenders***                                                                          

  ***(Actual Tonnage)***                                                              

                                                                                      

                           U.S.      Thailand   Australia   China     Others          Total

  ***JFY2008 (As of March                                                              
  10, 2009)***                                                                        

  SBS                      18,616    13,260     0           62,070    546             94,492

  *Share*                  *19.7%*   *14.0%*    *0.0%*      *65.7%*   *0.6%*          *100.0%*

  OMA                      325,000   200,000    0           0         0               525,000

  *Share*                  *61.9%*   *38.1%*    *0.0%*      *0.0%*    *0.0%*          *100.0%*

  Total                    343,616   213,260    0           62,070    546             619,492

  Share                    *55.5%*   *34.4%*    *0.0%*      *10.0%*   *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%*

  ***JFY 2004***                                                                       

  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%*

  ***JFY 2003***                                                                       

  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%*

  ***JFY 2002***                                                                       

  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%*

  ***JFY 2001***                                                                       

  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%*

  ***JFY 2000***                                                                       

  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%*

  ***JFY 1999***                                                                       

  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%*

  ***JFY 1998***                                                                       

  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%*

  ***JFY 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%*

  ***JFY 1996***                                                                       

  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%*

  ***JFY 1995***                                                                       

  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                                                                        
  ------------------------ --------- ---------- ----------- --------- --------------- ----------

## 

## Trade for Processed Rice Products

The United States is one of the three largest exporters of rice flour
preparations to Japan along with Thailand and China. The U.S. suppliers
have long catered to the specific needs of Japanese end users and have
developed a mutually beneficial stable business.

In June 2005, MAFF started to release stocks of imported rice into the
rice flour sector in an effort to curb the "surge" of imports of rice
flour preparations and to reduce the inflating stocks of imported rice
(estimated at roughly 1.5 MMT). It became clear that this
sector-specific release program was substantially affecting U.S. exports
(down nearly 20 percent in 2007 from 2005). USDA adamantly pursued this
issue with MAFF at various bilateral fora. Consequently, MAFF eliminated
this release program at the end of October 2008. Post will continue
monitoring MAFF's movements to release rice stocks to originally
unintended sectors.

The U.S. share in imports of rice crackers, pilaf and *sake* (rice wine)
remains small due to high labor costs compared to those in countries
like Thailand (the largest exporter to Japan of rice crackers), China
(the largest exporter of pilaf) and the Republic of Korea (the largest
exporter of *sake*).

**Table 6.**

  ------------------- --------- -------- -------- -------- -------- ---------
  ***Japanese Imports                                               
  of Processed Rice                                                 
  Products***                                                       

  ***(MT, except                                                    
  sake)***                                                          

                                                                    

                      CY 2006            CY 2007           CY 2008  

                      Total     U.S.     Total    U.S.     Total    U.S.

  Flour preparations  107,790   27,270   90,201   25,991   85,889   25,290

  Rice Crackers       10,786    0        11,592   0        11,044   0

  Pilaf               961       1        819      2        318      2

  Sake (1,000 liters) 3,534     0        2,928    0        615      0

  Source: Ministry of                                               
  Finance                                                           
  ------------------- --------- -------- -------- -------- -------- ---------

## Stocks 

MAFF holds emergency stocks of rice, whose appropriate level is
currently targeted at 1 million MT. However, this does not include the
Minimum Access (MA) rice. MAFF's official supply and demand table does
not include stocks of MA rice. As shown below, stocks of domestic rice
have been reduced over the years, and since 2004 have been below the
targeted level due to a poor crop in 2003. With the planned set-aside
program of 100,000 MT, domestic rice stocks are expected to surpass 1
MMT this year. In contrast, stocks of MA rice had been piling up and
peaked in 2006. However, MAFF has been selling MA rice aggressively into
the feed sector for the last two years, running down the stock level. It
is estimated that about 600,000 Mt of MA rice is now going into the feed
sector. Further, it has been reported that MAFF will be supplying MA
rice to ethanol plants. 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

  1995              370,000           1,180,000       0              1,550,000

  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

  Source: Food                                                       
  Department/MAFF                                                    
  ----------------- ----------------- --------------- -------------- --------------

## Minimum Access Commitment Continues into 2007

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                          With            
                    Tariffication                    Tariffication   

                    Volume          Percent of       Volume          Percent of

                                    Domestic                         Domestic
                                    Consumption                      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 (40,456 MT in the calendar year 2008 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. In the midst of a
perceived rice shortage in the Southeast Asia, there were talks that
Japan might use MA rice as additional food aid for countries in need.
However, none of these deals have come through.

# WHEAT

## Production in 2008 Declines 3 Percent 

The total planted area for wheat in 2008 stayed about the same as the
previous year. However, small precipitation in late June to early July
as well as lack of sunlight in July affected yield, which resulted in a
3.0 percent decline in the total production volume at 882,400 MT.

**Table 9.**

  --------------- ---------------------- ------------------ -------------------
  ***Japan\'s                                               
  Wheat                                                     
  Production***                                             

                                                            

                  Planted Area           Production         Yield

                  (hectares)             (MT)               (MT/ha)

  2004            212,600                860,300            4.05

  2005            213,500                874,700            4.10

  2006            218,300                837,200            3.84

  2007            209,700                910,100            4.34

  2008            208,800                882,400            4.23

  Source: MAFF                                              
  --------------- ---------------------- ------------------ -------------------

## Wheat Consumption Stays Flat

Historically, wheat consumption had been increasing gradually as
consumers shifted from rice to processed wheat products such as bread
and pasta. However, consumption has been flat in the last two decades.
In 2007, per capita consumption of wheat showed a slight increase but
the actual household spending on wheat based products has been stagnant
throughout 2008 particularly in the latter half as prices of these
products increased significantly as shown in the Rice Section. In the
long run, with the growing size of the elderly population, who tend to
eat less in quantity and more traditional foods, wheat consumption is
expected to decline slowly but steadily.

**Table 10.**

  ------------------- ------- ------- ------- ------- ------- ------ ------- ------- --------
  ***Per Capita                                                                      
  Consumption of                                                                     
  Wheat in Japan***                                                                  

  ***(Kilograms)***                                                                  

                                                                                     

  1985                2000    2001    2002    2003    2004    2005   2006    2007    2008\*

  31.7                32.6    32.1    31.9    32.6    32.3    31.7   31.8    32.3    31.7

  Source: MAFF                                                                       

  \* Ag Office                                                                       
  estimate                                                                           
  ------------------- ------- ------- ------- ------- ------- ------ ------- ------- --------

## Utilization Patterns

In 2008 production of all major wheat based products showed a slight
increase. In the long term, domestic production of these selected wheat
products is estimated to be flat or to decline slightly as Japan's
demographics change. However, as mentioned in the previous section,
actual consumer spending slumped as price increased.

**Table 11.**

  ------------------ ---------- ---------- ---------- ---------- ----------
  ***Japanese                                                    
  Production of                                                  
  Selected Wheat                                                 
  Products***                                                    

  ***(1,000 MT)***                                               

                                                                 

                     2004       2005       2006       2007       2008\*

  Wheat Flour        4,667      4,623      4,599      4,672      4,695

  Bread              1,243      1,232      1,218      1,211      1,217

  Noodles            1,414      1,368      1,324      1,319      1,326

  Biscuit            214        213        218        225        226

  Premix             365        357        361        366        368

  \* Ag Office                                                   
  Estimate                                                       

  Source: MAFF                                                   
  ------------------ ---------- ---------- ---------- ---------- ----------

## 

## Wheat Resale Price Significantly Raised 

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 15 below, the
ratio in recent years until 2006 had been consistent 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) in each country on the resale price. The initial resale prices
set for April - September 2007 (Table 12), were based on an average of
the past half year or full year FOB prices. The \"mark-up\" ratio
(coefficient) on an annual average was meant to stay at the range
between 1.8 to 1 and 2.1 to 1 as before. However, soaring international
prices of wheat quickly worsened MAFF's balance sheet. From September
2007 till April 2008 MAFF ran in the red as shown in Table 12 below,
despite repeated resale price hikes that increased the resale price by
50 percent in one year. Now that the import price has returned to the
2006 level, it is reported that MAFF will reduce the resale price in
April 2009.

**Table 12.**

  -------------------------- ----------------- -------------- ------------
  ***GOJ Purchase and Resale                                  
  Price of U.S. Wheat***                                      

  ***(Yen per MT)***                                          

                                                              

                             Average CIF       Resale          

                             Price\* (a)       Price\*\* (b)  (b)/(a)

  2003                       22,855            45,790         2.0

  2004                       22,923            45,560         2.0

  2005                       21,521            45,350         2.1

  2006                       25,377            44,970         1.8

  Apr-07                     35,537            42,730         1.2

  May-07                     35,053                           1.2

  Jun-07                     37,130                           1.2

  Jul-07                     39,412                           1.1

  Aug-07                     40,429                           1.1

  Sep-07                     50,414                           0.8

  Oct-07                     59,901            46,990         0.8

  Nov-07                     57,473                           0.8

  Dec-07                     65,129                           0.7

  Jan-08                     69,127                           0.7

  Feb-08                     74,587                           0.6

  Mar-08                                                       

  Apr-08                     58,349            61,090         1.0

  May-08                     50,508                           1.2

  Jun-08                     46,396                           1.3

  Jul-08                     49,403                           1.2

  Aug-08                     49,309                           1.2

  Sep-08                     43,696                           1.4

  Oct-08                     24,688            67,200         2.7

                                                              

  \*US Wheat (HS Code:                                        
  100190019)                                                  

  \*\*US Western White II                                     

  Source: MAFF and Ministry                                   
  of Finance                                                  

  The price includes 5%                                       
  consumption tax.                                            
  -------------------------- ----------------- -------------- ------------

**Table 13.**

  --------------------------- -------- --------- -------- --------- --------
  ***GOJ Resale Price of                                            
  Wheat by Brand***                                                 

  ***Yen per MT***                                                  

                                                                    

  *** ***                              April -   Oct. 07- April -   Oct. 08-
                                       Sept.              Sept.     

  Brand                       2006     2007      March 08 2008      March 09

  U.S. Western White (WW)     44,970   42,730    46,990   61,090    67,200

  Australia Standard White    46,350   48,660    53,530   69,590    76,550
  (ASW)                                                             

  U.S. Hard Red Winter (HRW)  45,920   47,440    52,170   67,830    74,610

  Canada Western Red Spring   51,140   51,140    56,250   73,130    80,440
  #1 (1CW)                                                          

  U.S. Dark Northern Spring   49,270   49,270    54,190   70,450    77,500
  (DNS)                                                             

  Average of above 5 brands   47,820   48,430    53,270   69,120    76,030

  \% change                            1%        10%      30%       10%

  Source: MAFF                                                      
  --------------------------- -------- --------- -------- --------- --------

## 

## Wheat Imports Show Increase in 2008

Total imports of wheat in calendar year (CY) 2008 increased by 9.6
percent to 5,780,711 MT. Over the medium term, however, imports of wheat
are forecast to decline slowly but steadily as Japan's demographics
change. As most of the increase went to the United States, the U.S.
share of total imports in 2008 was raised to 63.3 percent.

**Table 14.**

  ------------- ------------- -------- ------------- ------------ ------------
  ***Japanese                                                     
  Wheat Imports                                                   
  by Source***                                                    

  ***(MT)***                                                      

                                                                  

  Year          U.S.          Share    Canada        Australia    TOTAL

  CY 2006       3,002,097     56.2%    1,193,154     1,133,540    5,337,110

  CY 2007       3,166,974     60.0%    1,136,261     948,251      5,275,108

  CY 2008       3,658,265     63.3%    1,180,784     932,665      5,780,711

  Source:                                                         
  Ministry of                                                     
  Finance                                                         
  ------------- ------------- -------- ------------- ------------ ------------

**Table 15.**

  -------------------- --------- -------- --------- -------- --------- --------
  ***Japanese Imports                                                  
  of Processed Wheat                                                   
  Products***                                                          

  ***(MT)***                                                           

                                                                       

                       CY 2006            CY 2007            CY 2008   

                       Total     US Share Total     US Share Total     US Share

  Flour preparations   138,510   6.5%     117,019   7.5%     100,161   8.9%

  Pasta (excl.         109,791   22.5%    104,411   22.8%    127,254   19.2%
  stuffed)                                                             

  Biscuits             24,481    6.1%     23,105    6.3%     17,998    9.3%

  Bread                10,058    40.0%    7,354     26.1%    5,562     12.7%

  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 16.**

  ---------------------------- -------------- -------------- --------------
  ***Japanese Exports of Wheat                               
  Flour by Destination***                                    

  ***(MT)***                                                 

                                                             

  Destination                  CY 2006        CY 2007        CY 2008

  Hong Kong                    182,077        166,439        116,588

  Vietnam                      30,877         23,460         11,983

  Singapore                    37,596         33,255         32,164

  Thailand                     15,826         13,396         9,503

  United States                899            1,017          985

  Other                        22,754         17,808         15,659

  Total                        290,029        255,375        186,882

  Source: Ministry of Finance                                
  ---------------------------- -------------- -------------- --------------

## Stocks

Japan has held emergency stocks of wheat at a level equivalent to 2.6
months' worth of demand. Due to the shortened time necessary to obtain
alternative supplies in case of an emergency, the stocks have been
reduced to 1.8 months' worth. Although the actual stock figures are not
disclosed, 1.8 months' worth of stocks translates to around 900,000
metric tons.

## Feed Wheat Imports through SBS System

In 1999, MAFF introduced the Simultaneous Buy and Sell (SBS) system for
imported wheat and barley for feed use. During JFY 2008, MAFF conducted
ten SBS tenders, through which 70,045 MT of imported wheat was
contracted. Although information on the country of origin of successful
tender contracts is not disclosed, according to trade sources, a very
small amount of imports from China took place. However, Post does not
see a significant advance by China or other low cost producers in the
foreseeable future.

**Table 17.**

  --------------------------- ------------------ -------------------- ----
  ***SBS Imports of Feed                                              
  Wheat and Barley***                                                 

  ***(MT)***                                                          

                                                                      

                              Wheat              Barley               

  1st tender                  13,440             179,095              

  2nd                         12,760             179,740              

  3rd                         9,000              82,000               

  4th                         16,400             88,420               

  5th                         0                  36,080               

  6th                         0                  25,500               

  7th                         0                  84,300               

  8th                         7,230              69,000               

  9th                         0                  12,650               

  10th                        11,215             176,320              

  Total                       70,045             933,105              

  Source: MAFF                                                        

                                                                      
  --------------------------- ------------------ -------------------- ----

## 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]{.underline}:

There are two categories of SBS wheat imports. First, MAFF planned to
transfer state purchases of roughly 240,000 to 250,000 MT of Australian
Prime Hard and roughly 240,000 to 250,000 MT of Durum to the SBS system.
(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.

The second category included wheat varieties that are not imported under
the state trading regime (See below.) The idea was 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)

Due to the extraordinary wheat trade situation caused by sharp price
hikes in the international market, the first two years of SBS imports
did not go as laid out in the original plan above. The buyers/users were
hesitant to take risks against price fluctuations in the volatile market
situation.

**Table 18.**

  -------------- --------- ---------- ----------- --------- ---------- -----------
  ***SBS Imports                                                       
  of Food                                                              
  Wheat***                                                             

                                                                       

  Tender                   Category I                       Category    
                                                            II         

  (Date)         MT        Type       Country     MT        Type       Country

  1st                                             1,894                France

  18-Apr-08                                       7,503     Prime Hard Australia

  2nd            31,500    Durum      Canada                            

  29-May-08                                                             

  3rd            10,000    Durum      Canada      7,400     Prime Hard Australia

  26-Jun-08                                                             

  4th                                                                   

  24-Jul-08      30,100    Durum      Canada                            

  31-Jul-08      5,300     Prime Hard Australia                         

  5th            10,000    Durum      Canada      2,600     Prime Hard Australia

  28-Aug-08                                       666                  NA

  6th            25,500    Durum      Canada                            

  10-Oct-08                                                             

  7th            5,000     Durum      Canada      6,898     Prime Hard Australia

  30-Oct-08                                                             

  8th            10,100    Prime Hard Australia                         

  27-Nov-08                                                             

  9th            35,000    Durum      Canada      221                  USA

  17-Dec-08      3,320     Prime Hard Australia   280                  Canada

                                                  9,500     Prime Hard Australia

                                                  1,612                France

  10th           6,500     Durum      Canada                            

  14-Jan-09                                                             

  Total Volume   172,320                          38,574                

  Source: MAFF                                                         

                                                                       
  -------------- --------- ---------- ----------- --------- ---------- -----------

#  

# CORN

## Production

Corn production is negligible in Japan.

## Overall Demand Stable While High Feed Price Will Severely Hurt Japanese Livestock Producers

Despite the historic high price, demand for corn in Japan in 2008 stayed
highly stable, both in the feed sector and food sector. Corn is the
largest ingredient in compound feed and Japan's corn supply relies
solely on imports. A stable corn supply, in terms of both quantity and
price, is the lifeline for Japan's livestock production.

Due to soaring feed grain prices the price of compound feed has
increased 58 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. Yet, the livestock farmer's purchase
price of compound feed has increased 40 percent during the period.

**Chart 9.**

![](media/image10.wmf){width="5.96875in" height="3.7083333333333335in"}

Source: MAFF

The higher cost of feed has been a tremendous burden on Japan's
livestock industry. Consequently, the population of livestock animals
decreased in 2008, except for beef cattle, as shown in the table below.
Labor intensive dairy farmers have been the hardest hit.

**Table 19.**

  --------------- --------- --------- ----------- --------- --------- --------- --------------
  ***Japan\'s                                                                   
  Livestock                                                                     
  Population***                                                                 

  ***(1,000                                                                     
  heads)***                                                                     

                                                                                

                  2003      2004      2005        2006      2007      2008      ***%08/03***

  Dairy cows      1,719     1,690     1,655       1,636     1,592     1,533     ***89.2%***

  Beef cattle     2,805     2,788     2,747       2,755     2,806     2,890     ***103.0%***

  Swine           9,725     9,724     9,750\*     9,620     9,759     9,745     ***100.2%***

  Layers          137,299   137,216   136,000\*   136,894   142,765   142,523   ***103.8%***

  Broilers        103,730   104,950   102,520     103,687   105,287   102,987   ***99.3%***

  Source: MAFF                                                                  
  (as of February                                                               
  each year)                                                                    

  \* Ag Office                                                                  
  Estimate                                                                      
  --------------- --------- --------- ----------- --------- --------- --------- --------------

The downward trend in the livestock population appears irreversible and
feed demand in Japan is expected to decline slowly but surely in years
to come. The future of corn demand in Japan relies heavily on developing
and enhancing demand in the non-feed sector. In the past several years,
a robust demand for food corn has been driven by a strong beverage
demand for corn sweeteners. However, as Japan's economy is expected to
seriously worsen in 2009, demand for beverages (non-necessity items) may
also be negatively affected.

**Table 20.**

  ----------------------------- -------------- ------------ --------------
  ***Imports of Meat by                                     
  Origin***                                                 

  ***(1,000 MT)***                                          

                                CY 2006        CY 2007      CY 2008

  Beef, fresh/chilled (HS Code:                             
  0201)                                                     

  United States                 5              18           31

  Share                         2.3%           8.2%         15.6%

  Australia                     208            188          159

  Total                         223            216          199

  Beef, frozen (HS Code: 0202)                              

  United States                 2              16           23

  Share                         0.9%           6.3%         8.9%

  Australia                     197            206          199

  Total                         237            258          259

  Pork, fresh/chilled/frozen                                
  (HS Code: 0203)                                           

  United States                 252            271          337

  Share                         34.8%          35.6%        41.2%

  Denmark                       168            161          160

  Canada                        152            166          175

  Total                         725            760          818

  Poultry, fresh/chilled/frozen                             
  (HS Code: 0207)                                           

  United States                 28             24           25

  Share                         7.4%           6.6%         5.7%

  Taiwan                        5              5            5

  France                        1              2            1

  Brazil                        338            324          397

  Total                         380            360          434

  Source: Ministry of Finance                               
  ----------------------------- -------------- ------------ --------------

## Utilization Patterns

Of the total demand for corn in Japan (approximately 16.5 million MT),
roughly 70 percent comes from the feed sector, 22 percent from starch
manufacturers, and 8 percent from other food-use sectors including
manufacturers of corn grits (used as a fermentation ingredient in
liquors), cornflakes and confections.

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, but the corn ratio has been fairly constant at 48--50
percent in recent years. Of the total demand for feed corn (roughly 12.0
million MT), about 43-44 percent (5.2 million MT) comes from the poultry
sector.

**Table 21.**

  --------------- ------------ ----------- -------- --------- --------- --------- --------- -------- --------- ------------ ------------- ------------
  ***Feed                                                                                                                                 
  Utilization by                                                                                                                          
  Ingredients in                                                                                                                          
  2007***                                                                                                                                 

                                                                                                                                          

                                                                        Wheat                        Other     Grain        Other          

                  Corn         Sorghum     Wheat    Barley    Rice      Flour     Rye       Oats     Grains    Total        Ingredients   Total

  Layer Feed                                                                                                                               

  MT              3,561,034    84,642      658      0         162,826   1,901     1         0        2,349     3,813,411    2,763,699     6,577,110

  \%              54.1%        1.3%        0.0%     0.0%      2.5%      0.0%      0.0%      0.0%     0.0%      58.0%        42.0%         100.0%

  Broiler Feed                                                                                                                             

  MT              1,634,154    565,692     2,721    1,291     184,304   5,593     126       0        8,030     2,401,911    1,408,457     3,810,368

  \%              42.9%        14.8%       0.1%     0.0%      4.8%      0.1%      0.0%      0.0%     0.2%      63.0%        37.0%         100.0%

  Poultry Total                                                                                                                            

  MT              5,195,188    650,334     3,379    1,291     347,130   7,494     127       0        10,379    6,215,322    4,172,156     10,387,478

  \%              50.0%        6.3%        0.0%     0.0%      3.3%      0.1%      0.0%      0.0%     0.1%      59.8%        40.2%         100.0%

  Dairy Cattle                                                                                                                             

  MT              1,383,274    21,840      7,582    60,658    51,684    23,878    39,359    5,483    16,898    1,610,656    1,577,436     3,188,092

  \%              43.4%        0.7%        0.2%     1.9%      1.6%      0.7%      1.2%      0.2%     0.5%      50.5%        49.5%         100.0%

  Beef Cattle                                                                                                                              

  MT              1,779,413    72,042      38,317   726,440   17,315    41,564    33,652    1,973    15,263    2,725,979    1,766,164     4,492,143

  \%              39.6%        1.6%        0.9%     16.2%     0.4%      0.9%      0.7%      0.0%     0.3%      60.7%        39.3%         100.0%

  Cattle Feed                                                                                                                              
  Total                                                                                                                                   

  MT              3,162,687    93,882      45,899   787,098   68,999    65,442    73,011    7,456    32,161    4,336,635    3,343,600     7,680,235

  \%              41.2%        1.2%        0.6%     10.2%     0.9%      0.9%      1.0%      0.1%     0.4%      56.5%        43.5%         100.0%

  Swine Feed                                                                                                                               

  MT              3,318,874    387,815     41,768   58,794    140,482   56,367    75,594    19       80,450    4,160,163    1,755,416     5,915,579

  \%              56.1%        6.6%        0.7%     1.0%      2.4%      1.0%      1.3%      0.0%     1.4%      70.3%        29.7%         100.0%

  Feed, other                                                                                                                              

  MT              36,259       2,998       95       963       435       1,383     800       1,093    231       44,257       39,891        84,148

  \%              43.1%        3.6%        0.1%     1.1%      0.5%      1.6%      1.0%      1.3%     0.3%      52.6%        47.4%         100.0%

  Compound Feed                                                                                                                            
  Total                                                                                                                                   

  MT              11,713,008   1,135,029   91,141   848,146   557,046   130,686   149,532   8,568    123,221   14,756,377   9,311,063     24,067,440

  \%              48.7%        4.7%        0.4%     3.5%      2.3%      0.5%      0.6%      0.0%     0.5%      61.3%        38.7%         100.0%

  Mixed Feed                                                                                                                               

  MT              293,125      2,780       3,934    11,806    525       1,009     2,974     1,453    10,737    328,343      122,731       451,074

  \%              65.0%        0.6%        0.9%     2.6%      0.1%      0.2%      0.7%      0.3%     2.4%      72.8%        27.2%         100.0%

  Feed Total                                                                                                                               

  MT              12,006,133   1,137,809   95,075   859,952   557,571   131,695   152,506   10,021   133,958   15,084,720   9,433,794     24,518,514

  \%              49.0%        4.6%        0.4%     3.5%      2.3%      0.5%      0.6%      0.0%     0.5%      61.5%        38.5%         100.0%

  Source: Feed                                                                                                                            
  Supply                                                                                                                                  
  Stabilization                                                                                                                           
  Organization                                                                                                                            
  --------------- ------------ ----------- -------- --------- --------- --------- --------- -------- --------- ------------ ------------- ------------

**Table 22.**

  ------------- ---------- --------- --------- ------------ ---------- ---------
  ***Japanese                                                          
  Compound and                                                         
  Mixed Feed                                                           
  Production by                                                        
  Type of                                                              
  Animal***                                                            

  ***(1,000                                                            
  MT)***                                                               

                                                                       

                Compound                                    Mixed      Grand-
                Feed                                                   

                Poultry    Swine     Cattle    Subtotal\*   Feed       Total

  JFY 2004      10,067     5,919     7,302     23,370       547        23,916

  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\*    10,154     5,933     7,791     23,949       341        24,290

  \*\* Ag                                                              
  Office                                                               
  preliminary                                                          
  estimates                                                            

  Source: MAFF                                                         
  ------------- ---------- --------- --------- ------------ ---------- ---------

## 

## Prices

The CIF price of U.S. corn jumped near 50 percent again in 2008,
reflecting both soaring farm gate prices and higher freight rates.
Surges in U.S. corn prices directly translate to higher feed prices in
Japan as explained in the previous sections. Japan's compound feed price
for the current quarter (January-March 2008) is reported at 67,480
yen/MT, an increase of over 58 percent since September 2006.

**Table 23**.

  ----------------- ------------- ------------- ------------- --------------
  ***Average CIF                                              
  Price of Corn for                                           
  Feed by Origin***                                           

  ***(\$US per                                                
  MT)***                                                      

                                                              

                    CY 2006       CY 2007       CY 2008       ***%08/07***

  United States     149.4         227.1         334.1         ***147.1%***

  Argentina         151.4         244.2         378.8         ***155.1%***

  China             165.8         218.3         283.5         ***129.9%***

  Brazil            NA            214.2         218.6         ***102.1%***

  Source: Ministry                                            
  of Finance                                                  
  ----------------- ------------- ------------- ------------- --------------

## 

## Trade

Although the quick trade statistics report issued by the Ministry of
Finance (MOF) shows that total feed corn imports in 2008 were 10,841,320
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 4.6 MMT. Historically, MOF has often revised its corn import
statistics later in the year. Despite the high price, since China and
Argentina have put in place export taxes and export restrictions on
corn, the U.S. import share increased to 99 percent.

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. As a result of
the lack of availability and higher premiums for identity preserved (IP)
"non-GMO" food use corn, many Japanese users have reportedly started
buying non-IP corn.

**Table 24.**

  -------------------------- -------------- -------------- --------------
  ***Imports of Corn by                                    
  Origin***                                                

  ***(1,000 MT)***                                         

                                                           

                             CY 2006        CY 2007        CY 2008

  Corn for feed                                             

  United States              12,043         11,217         10,728

  Share                      97.1%          93.0%          99.0%

  Argentina                  75             279            54

  China                      279            557            2

  Brazil                     0              6              1

  Others                     0              1              56

  Total                      12,397         12,061         10,841

  Corn for manufacturing                                    

  United States              4,297          4,333          5,549

  Share                      95.8%          94.9%          98.8%

  Argentina                  5              98             33

  Australia                  1              1              0

  China                      171            92             0

  South Africa               0              0              0

  Brazil                     0              33             5

  Others                     10             8              30

  Total                      4,485          4,565          5,617

  Total corn                                                

  United States              16,341         15,550         16,227

  Share                      96.8%          93.5%          98.6%

  Total                      16,881         16,626         16,459

  Source: Ministry of                                      
  Finance                                                  
  -------------------------- -------------- -------------- --------------

## 

## Stocks 

Japan holds emergency stocks of essential feed grains, i.e. corn,
sorghum, and barley. The stock level since 2005 has 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
barley. Since 2006 barley stocks have been replaced by rice.

**DDGS Imports on the Rise**

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). As a result of aggressive
educational activities led by the U.S. Grains Council, Japan's imports
of DDGS from the United Sates have been increasing remarkably and
surpassed the 100,000 MT mark in 2007, and 200,000 MT in 2008.

**Chart 10.**

![](media/image11.wmf){width="6.260416666666667in"
height="3.9166666666666665in"}

Source: Ministry of Finance

# SORGHUM

## Production

Like corn, production of sorghum is negligible in Japan.

## Consumption

Sorghum being 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 the 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. In JFY 2007, the most recent year with confirmed
statistics, the sorghum utilization ratio went down to 4.6 percent from
7.6 percent in 2001.

## 

## Prices 

Similar to corn, CIF prices for sorghum took a sharp rise in 2007 and
2008. In 2008 an increased demand for U.S. sorghum in Mexico, caused by
Mexico's aversion to purchasing biotech food corn from the United
States, created a further upward pressure on price.

**Table 25.**

  ----------------------- ------------ ----------- ------------ --------------
  ***Average CIF Price of                                       
  Sorghum for Feed by                                           
  Origin***                                                     

  ***(\$US per MT)***                                           

                                                                

                          CY 2006      CY 2007     CY 2008      ***%08/07***

  United States           155.7        230.8       338.0        ***146.4%***

  Argentina               136.3        227.0       329.8        ***145.3%***

  Australia               150.2        NA          342.1        ***NA***

  China                   NA           223.0       282.0        ***126.5%***

  Source: Ministry of                                           
  Finance                                                       
  ----------------------- ------------ ----------- ------------ --------------

## Trade

The U.S. is the largest supplier of sorghum to Japan. Since sorghum is
mainly a substitute for corn, potential growth in Japan's sorghum
imports largely depends on its relative price to corn. The demand for
U.S. sorghum from Mexico, mentioned above, limited the availability of
U.S. sorghum exports to Japan. As the U.S. and Argentine sorghum prices
soared, Australia has returned as a major supplier, lowering the U.S.
share from the 80 percent level in 2006 to below 50 percent in 2008.

As in the case of corn, the quick trade statistics report issued by the
Ministry of Finance (MOF) tends to show total feed sorghum imports lower
and food sorghum imports higher than the actual situation. Post
estimates that about 100,000 MT should be transferred from food sorghum
to feed sorghum imports for 2008. Imports are classified as being either
for feed or food, however, despite this technicality, much of the
sorghum imported under the food HS code must eventually end up in the
feed sector, considering that the total demand for sorghum in the feed
sector is approximately 1.1 million MT. (Refer to Table 24.)

**Table 26.**

  --------------------------- --------------- ------------- -------------
  ***Imports of Sorghum by                                  
  Origin***                                                 

  ***(1,000 MT)***                                          

                                                            

                              CY 2006         CY 2007       CY 2008

  Sorghum for feed                                           

  United States               971             587           377

  Share                       82.1%           58.9%         45.4%

  Argentina                   134             282           48

  Australia                   77              0             313

  China                       0               128           76

  Total                       1,182           997           830

  Sorghum, others                                            

  United States               135             109           146

  Share                       81.3%           48.2%         49.8%

  Argentina                   18              101           15

  Australia                   12              0             85

  China                       1               15            39

  Others                      0               0             0

  Total                       166             226           293

  Total sorghum                                              

  United States               1,106           696           522

  Share                       82.0%           56.5%         46.5%

  Total                       1,348           1,232         1,123

  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 were reduced to 75,000 MT in 2003, to 66,000 MT in 2004, 65,000
MT in 2005 and 64,000 MT since.

# BARLEY

## Production

According to Japan's Ministry of Agriculture, Forestry and Fisheries'
(MAFF) survey for the 2007 barley crop, production increased by 11.7
percent owing to an increase in the planted area and favorable weather
conditions resulting in increased yield over 2007. About 90 percent of
the total barley production area is on converted rice paddy land,
production of barley is strongly affected by the rice policy and its
reform where MAFF is encouraging expanded wheat and barley production.
Looking at the rate of increase in the planted area, however, the new
policy has not so far had a notable impact.

**Table 27.**

  ------------- -------------------------- --------------------------- ---
  ***Crop Area                                                         
  and                                                                  
  Production of                                                        
  Barley in                                                            
  Japan***                                                             

                                                                       

                Planted Area               Production                  

                (hectares)                 (1,000 MT)                  

  2004          59,860                     195,600                     

  2005          54,840                     184,500                     

  2006          53,820                     174,200                     

  2007          54,220                     194,600                     

  2008          56,650                     217,300                     

  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. Consumption of
barley is now estimated to be around 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

The average CIF price of barley soared in 2007 and again in 2008. The
U.S. CIF price increased by almost 50 percent in 2007 over 2006, and by
45 percent in 2008 over 2007.

**Table 28.**

  ----------------- ------------- ------------- ------------- --------------
  ***Average CIF                                              
  Prices of Barley                                            
  for Feed by                                                 
  Origin***                                                   

  ***(\$US per                                                
  MT)***                                                      

                                                              

                    CY 2006       CY 2007       CY 2008       ***%08/07***

  United States     194.8         291.9         424.1         ***145.3%***

  Canada            173.4         273.8         445.9         ***162.9%***

  Australia         171.5         279.5         384.3         ***137.5%***

  China             NA            246.7         392.7         ***NA***

  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
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.

In 2007, imports from the United States increased on the calendar year
basis to 501,000 MT. taking advantage of tight supplies from Canada and
Australia. In 2008, the total imports as well as U.S. imports dropped on
the calendar year basis. This is largely an import timing issue; often
the case for barley imports which take place through SBS tenders as
explained later. On the marketing year basis (October-September), total
imports in 2008 and 2007 are at same level of 1.36 million MT.

**Table 29.**

  ---------------------------- --------------- ------------- -------------
  ***Imports of Barley by                                    
  Origin***                                                  

  ***(1,000 MT)***                                           

                                                             

                               CY 2006         CY 2007       CY 2008

  Barley for feed                                             

  United States                154             501           414

  Share                        13.7%           41.9%         42.4%

  Canada                       303             145           226

  Australia                    607             413           316

  Ukraine                      60              0             0

  China                        0               64            5

  Others                       0               73            14

  Total                        1,124           1,196         974

  Barley, others                                              

  United States                2               1             2

  Share                        0.7%            0.3%          0.3%

  Canada                       37              55            57

  Australia                    221             155           260

  Others                       0               0             1

  Total                        259             210           320

  Total Barley                                                

  United States                155             501           416

  Share                        11.2%           35.6%         32.1%

  Total                        1,383           1,406         1,295

  Source: Ministry of Finance                                
  ---------------------------- --------------- ------------- -------------

## 

## SBS Tender for Feed Barley 

MAFF introduced the SBS system for barley for feed in JFY 1999. During
JFY 1999, 359,940 MT of feed barley was contracted under three tenders.
The allocation amount has been raised every year reaching 1.41 million
MT in 2008. In 2008, due to the volatile price situation, importers
hesitated to participate in the tenders after the 2^nd^ tender, leaving
about 476,000 MT of the total allocation unfilled in this fiscal year
Unlike rice imports, however, Japan has no WTO obligation to fill this
allocation.

**Table 30.**

  --------------------------- ------------------ -------------------- ----
  ***SBS Imports of Feed                                              
  Wheat and Barley***                                                 

  ***(MT)***                                                          

                                                                      

                              Wheat              Barley               

  1st tender                  13,440             179,095              

  2^nd^                       12,760             179,740              

  3^rd^                       9,000              82,000               

  4^th^                       16,400             88,420               

  5^th^                       0                  36,080               

  6^th^                       0                  25,500               

  7^th^                       0                  84,300               

  8^th^                       7,230              69,000               

  9^th^                       0                  12,650               

  10^th^                      11,215             176,320              

  Total                       70,045             933,105              

  Source: MAFF                                                        

                                                                      
  --------------------------- ------------------ -------------------- ----

## 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 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 barley as below.

## 

[Plans for Barley SBS Tenders]{.underline}:

The plan for food barley would allow for 200,000 MT of imports annually.
Annual imports of food barley are about 250,000 MT: 220,000 from
Australia for *shochu,* a distilled liquor; 30,000 from Canada for
barley tea; and only a few thousand tons from the United States mainly
for beer.

As with wheat there are two categories for barley. Category I is for
vessel trade. Although most barley is imported by vessel, there will
also be Category 2 for container units. Category 2 is basically reserved
for varieties that MAFF does not import and is intended to provide a
means for new varieties to enter the market.

## 

**Table 32.**

  -------------- --------- ---------- ----------- --------- ---------- -----------
  ***SBS Imports                                                       
  of Food                                                              
  Barley***                                                            

                                                                       

  Tender                   Category I                       Category    
                                                            II         

  (Date)         MT        Type       Country     MT        Type       Country

  1st            25,000               Australia                         

  18-Apr-08      15,000    for beer   Australia                         

  2nd            20,000               Australia                         

  29-May-08      5,000     for beer   Australia                         

  3rd            20,000               Australia   1,000                Australia

  26-Jun-08                                       480                  Canada

  4th            20,000               Australia                         

  24-Jul-08                                                             

  5th            20,000               Australia   216                  Australia

  28-Aug-08                                       312                  USA

                                                  270       for beer   Canada

  6th            20,000               Canada                            

  10-Oct-08      5,500     for beer   Canada                            

  7th            6,000     for beer   Canada      600                  Australia

  30-Oct-08                                                             

  8th                                                                   

  27-Nov-08                                                             

  9th            25,000               Australia   1508                 Australia

  17-Dec-08      5,500     for beer   Canada                            

  10th           15,000               Canada                            

  14-Jan-09                                                             

  Total Volume   202,000                          4,386                 

  Source: MAFF                                                         

                                                                       
  -------------- --------- ---------- ----------- --------- ---------- -----------

## Stocks

As written in the previous CORN and SORGHUM sections, Japan discontinued
holding government emergency stocks of barley. Since practically all of
feed barley Japan needs can be imported through the SBS tenders with an
ample allocation (1.41 million MT since 2008), MAFF explains that
government-held emergency stocks are no longer necessary.

# 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 for corn. Since there is practically no
domestic production, annual rye consumption and imports are directly
linked with domestic cattle and swine production. In 2007, the latest
statistics available (Table 21), total rye utilization in feed was
152,506 MT: 39,359 MT for dairy cattle; 33,652 for beef cattle; and
75,594 MT for swine. The ratio of rye in compound and mixed feed has
been declining in the last few years due to declining price
competitiveness, and it is expected to go down significantly in 2008
because of the fall in imports from Germany as explained in the
following Trade section.

## Prices

As shown below, U.S. rye is significantly less price competitive than
that of Germany or Canada, the two major suppliers for Japan.
Especially, the price of German rye soared in 2008 due to a fervent
demand in the EU caused by poor Russian and Ukraine crops.

**Table 33.**

  ----------------- ------------- ------------- ------------- --------------
  ***Average CIF                                              
  Price of Rye by                                             
  Origin***                                                   

  ***(\$US per                                                
  MT)***                                                      

                                                              

                    CY 2006       CY 2007       CY2008        ***%08/07***

  United States     615.6         630.7         748.1         ***118.6%***

  Canada            176.8         241.7         414.2         ***171.4%***

  Germany           138.2         202.5         424.8         ***209.8%***

  Source: Ministry                                            
  of Finance                                                  
  ----------------- ------------- ------------- ------------- --------------

## 

## Trade 

Germany dominates rye exports to the Japanese market because of its
price competitiveness. Imports from Germany in CY 2008 declined
dramatically due to the price situation as explained above. Although
imports may recover as the price situation improves in 2009, in the
medium term, rye imports are expected to steadily decline as Japan's
cattle and swine populations will likely continue shrinking. Prospects
for U.S. rye exports to Japan are directly linked to the relative price
of U.S. rye, and no significant advance is expected in the near future.

**Table 34**.

  -------------------------- -------------- -------------- ---------------
  ***Imports of Rye by                                     
  Origin***                                                

  ***(MT)***                                               

                                                           

                             CY 2006        CY 2007        CY 2008

  United States              284            501            1,087

  Canada                     8,350          60,373         53,241

  Germany                    263,236        154,278        4,911

  Other                      0              20             42

  Total                      271,870        215,172        59,281

  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 around 15,000 MT.

# BEANS

## Production

Small red beans (azuki) and kidney beans account for almost all of
Japan's dry bean production. The production volume of small red beans in
2008 increased 5.6 percent due to an enhanced yield more than offsetting
a slight drop in acreage. The production volume of kidney beans
increased at a greater rate of 11.9 percent due to a 4.8 percent
expansion in acreage and favorable weather conditions, which resulted in
a larger bean size in Hokkaido where 96 percent of the planted area in
Japan is located.

**Table 35.**

## 

  ------------ --------------- ---------------- --------------- ----------------
  ***Crop Area                                                  
  and                                                           
  Production                                                    
  of Major                                                      
  Beans in                                                      
  Japan***                                                      

                                                                

               Small Red                        Kidney Beans    
               (Azuki) Beans                                    

               Area (Hectares) Production (MT)  Area (Hectares) Production (MT)

  2004         42,600          90,500           11,800          27,300

  2005         38,300          78,900           11,200          25,700

  2006         32,200          63,900           10,000          19,100

  2007         32,700          65,600           10,400          21,900

  2008         32,100          69,300           10,900          24,500

  Source: MAFF                                                  
  ------------ --------------- ---------------- --------------- ----------------

## 

## Consumption

Japan's annual bean consumption had been fairly constant at around
230,000 metric tons. However, because the stagnant domestic economy and
an increasing shift in consumer preferences toward Western desserts have
negatively affected the demand for traditional Japanese confections (a
major user of beans), bean consumption has been declining to 180,000 --
200,000 MT level in the last few years.

## Trade

Japan's imports of small red beans and kidney beans combined increased
by 12.6 percent from 39,920 MT in 2006 to 44,944 MT in 2007, reflecting
reductions in Japanese domestic bean production in 2006. However, since
Japanese production recovered somewhat in 2007, 2008 imports returned to
the 2006 level. Another important trend to monitor is increasing imports
of finished and semi-finished sweetened bean paste, shown in the chart
below. Imports, predominantly from China, of processed sweetened bean
paste (HS code 2005-40.190, 2005-51.190, and 2005-90.119) have more than
doubled: from 37,970 MT in 1994 to 93,285 MT in 2007. However, after an
incident in September 2008 where sweetened bean paste imported from
China was found to contain poisonous toluene and ethyl acetate, making a
few people sick, imports dropped dramatically.

**Table 36.**

  ------------------------------ ------------- ------------- -------------
  ***Japanese Major Bean Imports                             
  by Supplier***                                             

  ***(MT)***                                                 

                                                             

                                 CY 2006       CY 2007       CY 2008

  Small Red Beans                25,277        29,635        24,441

  China                          18,917        26,153        20,438

  Canada                         4,747         2,796         3,421

  USA                            1,076         495           395

  Kidney Beans                   14,643        15,309        14,725

  China                          2,927         2,318         1,694

  Canada                         7,462         7,894         8,367

  USA                            1,986         2,440         2,184

  Peas                           15,586        14,781        11,945

  Canada                         9,791         9,196         6,970

  New Zealand                    706           1,216         739

  U.K.                           2,309         1,965         1,844

  USA                            1,265         1,163         392

  China                          389           462           1,121

  Hungary                        638           551           763

  Broad Beans                    7,055         7,098         6,088

  China                          6,059         5,810         5,236

  USA                            18            0             0

  Other Beans                    28,673        30,915        27,530

  Myanmar                        8,375         9,314         10,756

  USA                            9,007         8,743         7,693

  Total                          91,234        97,738        84,729

  Source: Ministry of Finance                                
  ------------------------------ ------------- ------------- -------------

**Chart 11.**

![](media/image12.wmf){width="6.1875in" height="3.2395833333333335in"}

Source: Ministry of Finance

## Policy

With the implementation of the Uruguay Round Agreement in JFY 1995, the
quota system for bean imports was replaced by a low tariff rate quota
system. A market access volume of 120,000 MT per annum is maintained
with 10 percent duty applied within the current access volume. As
mentioned in the previous section on trade, with a shrinking demand,
caused mainly by increasing imports of finished/semi-finished products,
particularly sweetened bean paste, the quota has not been fully utilized
since 2000.

# PS&D {#psd-1}

## Rice PS&D Table

  -------------- --------------- -------- ---------- --------------- -------- ---------- --------------- ------- ---------- ---------
  **Rice, Milled **2007**                            **2008**                            **2009**                           
  Japan**                                                                                                                   

                 **2007/2008**                       **2008/2009**                       **2009/2010**                      

                 **Market Year                       **Market Year                       **Market Year                      
                 Begin: Nov                          Begin: Nov                          Begin: Nov                         
                 2007**                              2008**                              2009**                             

                 **Annual Data            **New      **Annual Data            **New      **Annual Data           **Jan**    
                 Displayed**              Post**     Displayed**              Post**     Displayed**                        

                 Official         Post    **Data**   Official         Post    **Data**   Official         Post   **Data**   

  Area Harvested 1,673           1,673    1,673      1,670           1,650    1,627                              1,620      (1000 HA)

  Beginning      2,406           2,406    2,406      2,686           2,686    2,556                              2,715      (1000 MT)
  Stocks                                                                                                                    

  Milled         7,930           7,930    7,930      8,000           7,900    8,029                              7,710      (1000 MT)
  Production                                                                                                                

  Rough          10,893          10,893   10,893     10,989          10,852   11,029                             10,591     (1000 MT)
  Production                                                                                                                

  Milling Rate   7,280           7,280    7,280      7,280           7,280    7,280                              7,280      (1000 MT)
  (.9999)                                                                                                                   

  MY Imports     700             700      700        700             700      700                                700        (1000 MT)

  TY Imports     700             700      700        700             700      700                                700        (1000 MT)

  TY Imp. from   0               350      350        0               350      350                                350        (1000 MT)
  U.S.                                                                                                                      

  Total Supply   11,036          11,036   11,036     11,386          11,286   11,285                             11,125     (1000 MT)

  MY Exports     200             200      200        200             200      200                                200        (1000 MT)

  TY Exports     200             200      200        200             200      200                                200        (1000 MT)

  Total          8,150           8,150    8,280      8,230           8,130    8,370                              8,200      (1000 MT)
  Consumption                                                                                                               

  Ending Stocks  2,686           2,686    2,556      2,956           2,956    2,715                              2,725      (1000 MT)

  Total          11,036          11,036   11,036     11,386          11,286   11,285                             11,125     (1000 MT)
  Distribution                                                                                                              

  Yield (Rough)  7\.             7\.      6.5111     7\.             7\.      6.7787                             6.5377     (MT/HA)

  TS=TD                                   0                                   0                                  0          
  -------------- --------------- -------- ---------- --------------- -------- ---------- --------------- ------- ---------- ---------

##  

## WHEAT PS&D

## 

  -------------- --------------- ------- ---------- --------------- ------- ---------- --------------- ------- ---------- ---------
  **Wheat        **2007**                           **2008**                           **2009**                           
  Japan**                                                                                                                 

                 **2007/2008**                      **2008/2009**                      **2009/2010**                      

                 **Market Year                      **Market Year                      **Market Year                      
                 Begin: Jul                         Begin: Jul                         Begin: Jul                         
                 2007**                             2008**                             2009**                             

                 **Annual Data           **New      **Annual Data           **New      **Annual Data           **Jan**    
                 Displayed**             Post**     Displayed**             Post**     Displayed**                        

                 Official         Post   **Data**   Official         Post   **Data**   Official         Post   **Data**   

  Area Harvested 210             210     210        205             205     209                                205        (1000 HA)

  Beginning      1,242           1,166   1,242      1,515           1,151   1,479                              1,486      (1000 MT)
  Stocks                                                                                                                  

  Production     910             910     910        834             834     882                                843        (1000 MT)

  MY Imports     5,701           5,300   5,492      5,500           5,300   5,300                              5,300      (1000 MT)

  TY Imports     5,701           5,300   5,492      5,500           5,300   5,300                              5,300      (1000 MT)

  TY Imp. from   3,651           3,250   3,465      0               3,100   3,100                              3,200      (1000 MT)
  U.S.                                                                                                                    

  Total Supply   7,853           7,376   7,644      7,849           7,285   7,661                              7,629      (1000 MT)

  MY Exports     338             425     370        425             425     425                                400        (1000 MT)

  TY Exports     338             425     370        425             425     311                                400        (1000 MT)

  Feed           300             150     95         150             120     100                                100        (1000 MT)
  Consumption                                                                                                             

  FSI            5,700           5,650   5,700      5,700           5,600   5,650                              5,600      (1000 MT)
  Consumption                                                                                                             

  Total          6,000           5,800   5,795      5,850           5,720   5,750                              5,700      (1000 MT)
  Consumption                                                                                                             

  Ending Stocks  1,515           1,151   1,479      1,574           1,140   1,486                              1,529      (1000 MT)

  Total          7,853           7,376   7,644      7,849           7,285   7,661                              7,629      (1000 MT)
  Distribution                                                                                                            

  Yield          4\.             4\.     4.3333     4\.             4\.     4.2201                             4.1122     (MT/HA)

  TS=TD                                  0                                  0                                  0          
  -------------- --------------- ------- ---------- --------------- ------- ---------- --------------- ------- ---------- ---------

##  

## 

## Corn PS&D Table

## 

  -------------- --------------- -------- ---------- --------------- -------- ---------- --------------- ------- ---------- ---------
  **Corn Japan** **2007**                            **2008**                            **2009**                           

                 **2007/2008**                       **2008/2009**                       **2009/2010**                      

                 **Market Year                       **Market Year                       **Market Year                      
                 Begin: Oct                          Begin: Oct                          Begin: Oct                         
                 2007**                              2008**                              2009**                             

                 **Annual Data            **New      **Annual Data            **New      **Annual Data           **Jan**    
                 Displayed**              Post**     Displayed**              Post**     Displayed**                        

                 Official         Post    **Data**    Official        Post    **Data**   Official         Post   **Data**   

  Area Harvested 1               1        1          1               1        1                                  1          (1000 HA)

  Beginning      1,149           1,150    1,149      1,264           1,051    1,158                              1,259      (1000 MT)
  Stocks                                                                                                                    

  Production     1               1        1          1               1        1                                  1          (1000 MT)

  MY Imports     16,614          16,100   16,614     16,500          16,000   16,500                             16,300     (1000 MT)

  TY Imports     16,614          16,100   16,614     16,500          16,000   16,500                             16,300     (1000 MT)

  TY Imp. from   15,103          15,300   16,233     0               15,100   15,840                             15,650     (1000 MT)
  U.S.                                                                                                                      

  Total Supply   17,764          17,251   17,764     17,765          17,052   17,659                             17,560     (1000 MT)

  MY Exports     0               0        0          0               0        0                                  0          (1000 MT)

  TY Exports     0               0        0          0               0        0                                  0          (1000 MT)

  Feed           11,800          11,600   12,006     11,700          11,400   11,800                             11,700     (1000 MT)
  Consumption                                                                                                               

  FSI            4,700           4,600    4,600      4,800           4,600    4,600                              4,600      (1000 MT)
  Consumption                                                                                                               

  Total          16,500          16,200   16,606     16,500          16,000   16,400                             16,300     (1000 MT)
  Consumption                                                                                                               

  Ending Stocks  1,264           1,051    1,158      1,265           1,052    1,259                              1,260      (1000 MT)

  Total          17,764          17,251   17,764     17,765          17,052   17,659                             17,560     (1000 MT)
  Distribution                                                                                                              

  Yield          1\.             1\.      1\.        1\.             1\.      1\.                                1\.        (MT/HA)

  TS=TD                                   0                                   0                                  0          
  -------------- --------------- -------- ---------- --------------- -------- ---------- --------------- ------- ---------- ---------

##  

## 

## Sorghum PS&D Table

  -------------- --------------- ------- ---------- --------------- ------- ---------- --------------- ------- ---------- ---------
  **Sorghum      **2007**                           **2008**                           **2009**                           
  Japan**                                                                                                                 

                 **2007/2008**                      **2008/2009**                      **2009/2010**                      

                 **Market Year                      **Market Year                      **Market Year                      
                 Begin: Oct                         Begin: Oct                         Begin: Oct                         
                 2007**                             2008**                             2009**                             

                 **Annual Data           **New      **Annual Data           **New      **Annual Data           **Jan**    
                 Displayed**             Post**     Displayed**             Post**     Displayed**                        

                  Official        Post   **Data**    Official        Post   **Data**   Official         Post   **Data**   

  Area Harvested 0               0       0          0               0       0                                  0          (1000 HA)

  Beginning      105             128     105        105             128     89                                 89         (1000 MT)
  Stocks                                                                                                                  

  Production     0               0       0          0               0       0                                  0          (1000 MT)

  MY Imports     1,084           1,250   1,084      1,350           1,230   1,100                              1,150      (1000 MT)

  TY Imports     1,084           1,250   1,084      1,350           1,230   1,100                              1,200      (1000 MT)

  TY Imp. from   506             950     559        0               930     800                                850        (1000 MT)
  U.S.                                                                                                                    

  Total Supply   1,189           1,378   1,189      1,455           1,358   1,189                              1,239      (1000 MT)

  MY Exports     0               0       0          0               0       0                                  0          (1000 MT)

  TY Exports     0               0       0          0               0       0                                  0          (1000 MT)

  Feed           1,084           1,250   1,100      1,350           1,230   1,100                              1,150      (1000 MT)
  Consumption                                                                                                             

  FSI            0               0       0          0               0       0                                  0          (1000 MT)
  Consumption                                                                                                             

  Total          1,084           1,250   1,100      1,350           1,230   1,100                              1,150      (1000 MT)
  Consumption                                                                                                             

  Ending Stocks  105             128     89         105             128     89                                 89         (1000 MT)

  Total          1,189           1,378   1,189      1,455           1,358   1,189                              1,239      (1000 MT)
  Distribution                                                                                                            

  Yield          0\.             0\.     0\.        0\.             0\.     0\.                                0\.        (MT/HA)

  TS=TD                                  0                                  0                                  0          
  -------------- --------------- ------- ---------- --------------- ------- ---------- --------------- ------- ---------- ---------

##  

## 

## Barley PS&D Table

  -------------- --------------- ------- ---------- --------------- ------- ---------- --------------- ------- ---------- ---------
  **Barley       **2007**                           **2008**                           **2009**                           
  Japan**                                                                                                                 

                 **2007/2008**                      **2008/2009**                      **2009/2010**                      

                 **Market Year                      **Market Year                      **Market Year                      
                 Begin: Oct                         Begin: Oct                         Begin: Oct                         
                 2007**                             2008**                             2009**                             

                 **Annual Data           **New      **Annual Data           **New      **Annual Data           **Jan**    
                 Displayed**             Post**     Displayed**             Post**     Displayed**                        

                  Official        Post   **Data**    Official        Post   **Data**    Official        Post   **Data**   

  Area Harvested 54              54      54         52              52      56                                 55         (1000 HA)

  Beginning      480             530     480        436             475     456                                423        (1000 MT)
  Stocks                                                                                                                  

  Production     195             195     195        172             172     217                                190        (1000 MT)

  MY Imports     1,361           1,300   1,361      1,400           1,300   1,300                              1,350      (1000 MT)

  TY Imports     1,361           1,300   1,361      1,400           1,300   1,300                              1,350      (1000 MT)

  TY Imp. from   588             400     544        0               400     700                                800        (1000 MT)
  U.S.                                                                                                                    

  Total Supply   2,036           2,025   2,036      2,008           1,947   1,973                              1,963      (1000 MT)

  MY Exports     0               0       0          0               0       0                                  0          (1000 MT)

  TY Exports     0               0       0          0               0       0                                  0          (1000 MT)

  Feed           1,300           1,250   1,280      1,300           1,180   1,260                              1,250      (1000 MT)
  Consumption                                                                                                             

  FSI            300             300     300        300             290     290                                280        (1000 MT)
  Consumption                                                                                                             

  Total          1,600           1,550   1,580      1,600           1,470   1,550                              1,530      (1000 MT)
  Consumption                                                                                                             

  Ending Stocks  436             475     456        408             477     423                                433        (1000 MT)

  Total          2,036           2,025   2,036      2,008           1,947   1,973                              1,963      (1000 MT)
  Distribution                                                                                                            

  Yield          4\.             4\.     3.6111     3\.             3\.     3.875                              3.4545     (MT/HA)

  TS=TD                                  0                                  0                                  0          
  -------------- --------------- ------- ---------- --------------- ------- ---------- --------------- ------- ---------- ---------

##  

## 

## Rye PS&D Table 

  -------------- --------------- ------- ---------- --------------- ------- ---------- --------------- ------- ---------- ---------
  **Rye Japan**  **2007**                           **2008**                           **2009**                           

                 **2007/2008**                      **2008/2009**                      **2009/2010**                      

                 **Market Year                      **Market Year                      **Market Year                      
                 Begin: Oct                         Begin: Oct                         Begin: Oct                         
                 2007**                             2008**                             2009**                             

                 **Annual Data           **New      **Annual Data           **New      **Annual Data           **Jan**    
                 Displayed**             Post**     Displayed**             Post**     Displayed**                        

                  Official        Post   **Data**    Official        Post   **Data**   Official         Post   **Data**   

  Area Harvested 0               0       0          0               0       0                                  0          (1000 HA)

  Beginning      20              23      20         18              23      13                                 15         (1000 MT)
  Stocks                                                                                                                  

  Production     0               0       0          0               0       0                                  0          (1000 MT)

  MY Imports     83              250     83         225             240     180                                200        (1000 MT)

  TY Imports     83              250     83         225             240     180                                200        (1000 MT)

  TY Imp. from   4               0       1          0               0       0                                  1          (1000 MT)
  U.S.                                                                                                                    

  Total Supply   103             273     103        243             263     193                                215        (1000 MT)

  MY Exports     0               0       0          0               0       0                                  0          (1000 MT)

  TY Exports     0               0       0          0               0       0                                  0          (1000 MT)

  Feed           60              225     80         200             220     160                                180        (1000 MT)
  Consumption                                                                                                             

  FSI            25              25      10         25              23      18                                 20         (1000 MT)
  Consumption                                                                                                             

  Total          85              250     90         225             243     178                                200        (1000 MT)
  Consumption                                                                                                             

  Ending Stocks  18              23      13         18              20      15                                 15         (1000 MT)

  Total          103             273     103        243             263     193                                215        (1000 MT)
  Distribution                                                                                                            

  Yield          0\.             0\.     0\.        0\.             0\.     0\.                                0\.        (MT/HA)

  TS=TD                                  0                                  0                                  0          
  -------------- --------------- ------- ---------- --------------- ------- ---------- --------------- ------- ---------- ---------

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