Report Highlights:

Japan's feed industry relies almost entirely on imported grains. The composition of ingredients in compound feed had been traditionally stable (with the exception of 2012/13 when corn prices soared), with only small adjustments made in the composition depending on the price and availability of ingredients. In MY2014/15, use of rice in feed expanded significantly, cutting into the share of other ingredients to a notable extent. With an increase in feed rice production in 2015, use of rice in feed is expected to expand further in MY2015/16 and MY2016/17, further lowering the use of other ingredients.

Feed production

For the first time since MY2005/06 (MY; October – September), compound and mixed feed production fell below 24 million MT in MY2013/14 in accordance with the declining livestock population. Production decreased an additional 1.4 percent in MY2014/15. For 2016, Post expects that cattle numbers will decrease while swine numbers will recover slightly from the 2014 reduction caused by the Porcine Epidemic Diarrhea virus. The domestic poultry population is expected to remain unchanged. As a result, feed production is expected to stay at the same level as 2015. However, in accordance with the declining and aging Japanese population, overall food consumption is trending down, and therefore livestock numbers and feed production are forecast to decline in the future.

Use of rice in feed increased 60 percent in MY2014/15, raising the utilization ratio from 3.1 percent to five percent, at the expense of corn, sorghum, and wheat. With an expected increase in the production and use of feed rice, a further reduction in the use of other ingredients in compound feed is expected in MY2015/16.

Japan maintains a feed price stabilization program that consists of a combination of a MAFF subsidy and an industry fund to help absorb sudden surges in compound feed prices. It is activated when the import cost of ingredients in a particular quarter exceeds the average import cost of ingredients in the previous year. No compensation payments were made for the first three quarters of JFY 2015, reflecting lower prices for corn, soy meal and freight.

Corn

Corn

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct-14

Oct-15

Oct-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

1

1

1

1

0

1

Beginning Stocks

545

1263

502

1317

0

1317

Production

1

0

1

0

0

0

MY Imports

14656

14654

14700

14600

0

14600

TY Imports

14656

14654

14700

14600

0

14600

TY Imp. from U.S.

11911

12650

0

0

0

0

Total Supply

15202

15917

15203

15917

0

15917

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

10400

11000

10400

11000

0

10800

FSI Consumption

4300

3600

4300

3600

0

3600

Total Consumption

14700

14600

14700

14600

0

14400

Ending Stocks

502

1317

503

1317

0

1517

Total Distribution

15202

15917

15203

15917

0

15917

(1000 HA) ,(1000 MT)

Production

Japanese corn production is negligible.

Consumption

Post made the following revisions to feed/residual consumption and food/seed/industrial (FSI) consumption based on MAFF data. The beginning stocks in MY2014/15 have been revised accordingly.

Japan relies entirely on imports to meet domestic demand. Roughly 75 percent of imported corn is consumed by the feed sector, and 25 percent is used for processing, mainly for manufacturing cornstarch.

Historically, corn has been the major ingredient of compound feed, accounting for about 45 percent in recent years. Even though the CIF unit price decreased in MY2014/15 from the previous year, corn use in compound feed decreased due to increased use of rice. In the first four months of MY2015/16, the CIF unit price of feed corn declined further from MY2014/15, and corn used in compound feed was robust. If the current competitive price maintains throughout MY2015/16, corn for feed use is expected to be maintained at least at the MY2014/15 level. However, with an expected increase of rice in feed (see RICE section below), a slight decrease of corn for feed use is forecast in MY2016/17.

Cornstarch production has been stable at around 2.3 million MT in recent years. Total FSI consumption of corn was estimated at 3.6 million MT in MY2014/15. FSI consumption is forecast to remain stable at this level for MY2015/16 and MY2016/17.

Imports

Total corn imports in MY2014/15 decreased three percent from the previous year, reflecting slightly lower demand for feed. As price competitiveness of U.S. corn improved, imports of U.S. corn grew 14.8 percent in MY2014/15 from the previous year, while imports from Brazil fell nearly 40 percent. As feed and FSI consumption is expected to be flat, imports are expected to remain at 14.6 million MT in MY15/16, but are forecast to decrease slightly in MY2016/17 due to the forecast decrease in feed consumption.

Stock

In JFY2015, as part of its regular contingency plan, a total of 1.25 million MT of imported corn was held in reserve, of which the GOJ held 600,000 MT and the private sector held 650,000 MT. Beginning in JFY2016, the GOJ will no longer hold reserves but instead will subsidize storage costs for the reserve the private sector holds, and the total reserve level is expected to be maintained.

DDGS

Prior to MY2014/15, Japan's imports of Distiller's Dried Grains with Solubles (DDGS), a high value byproduct of ethanol production, grew significantly, as the price was reasonable for its nutrient value in comparison to other feed ingredients such as corn and soy meal. In MY2014/15, imports dropped 20 percent despite a decline in the CIF price. Increased use of rice in feed cut into the share of DDGS, as nearly 60 percent of these DDGS are used in layer feed. Although the amount of its utilization is still contingent upon prices of other feed grains, an anticipated increase of rice in feed is expected to further lower DDGS's utilization in compound feed in MY2015/16.

Wheat

Wheat

2014/2015

2015/2016

2016/2017

Market Begin Year

Jul-14

Jul-15

Jul-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

213

213

213

213

0

213

Beginning Stocks

1339

1159

1507

1227

0

1253

Production

852

852

996

996

0

825

MY Imports

5878

5878

5700

5700

0

5700

TY Imports

5878

5878

5700

5700

0

5700

TY Imp. from U.S.

2969

2969

0

0

0

0

Total Supply

8069

7889

8203

7923

0

7778

MY Exports

262

262

270

270

0

270

TY Exports

262

262

270

270

0

270

Feed and Residual

400

500

500

500

0

450

FSI Consumption

5900

5900

5900

5900

0

5900

Total Consumption

6300

6400

6400

6400

0

6350

Ending Stocks

1507

1227

1533

1253

0

1158

Total Distribution

8069

7889

8203

7923

0

7778

(1000 HA) ,(1000 MT)

Production

Wheat production in 2015 increased 17 percent from the previous year to 996,200 MT. Despite a one percent - or 800 ha - decrease in the planted area, production in Hokkaido increased 31 percent to 723,800 MT thanks to good weather, marking a record yield of 5.9 MT/ha. Production in the remaining prefectures declined 10 percent to 272,400 MT due to high moisture during the grain-filling period, despite a 1,300 ha increase in the planted area. Since wheat is produced as part of a crop rotation in Hokkaido, normally accounting for 60 percent of national wheat production, a sizable increase in the planted area is not possible despite increasing demand for domestic wheat in recent years. Thus, the planted area is expected to remain unchanged in 2016, and the production volume is forecast to decline 17 percent assuming average yield.

Consumption

Annual per capita consumption of wheat has been stable at nearly 33 kilogram in recent years, and with no significant change in the population, FSI consumption in MY2014/15 is estimated to be around 5.9 million MT. Post forecasts FSI consumption will remain unchanged for MY2015/16 and MY2016/17.

Depending on each year's crop, between 7 and 20 percent of domestic production of wheat falls “outside specifications" and is used for feed. The ratio of outside specification wheat was 7.4 percent of production in 2014 and 6.8 percent in 2015. Together with imported feed wheat, Post estimates 500,000 MT was used for feed in MY2014/15, and the same level is forecast for MY2015/16. Since about 70 percent of feed wheat is consumed by swine, and rice is mainly used for swine and poultry feed, an expected increase of rice used for feed is forecast to lower wheat consumption for feed slightly for MY2016/17.

Trade

For the last six years, imports of food wheat and wheat products have been stable at around 5.5 million MT, while feed wheat imports fluctuated between 123,000 MT and 960,000 MY, affected by demand and availability of other ingredients for compound feed production. For MY2014/15, while food wheat imports increased marginally, feed wheat imports halved from the previous year due to an increased utilization of rice in compound feed. As a result, total wheat imports decreased four percent. Despite no significant changes from the previous year in contracted volumes from MAFF's tenders for imports of five major wheat classes, food wheat imports for the first seven months of MY2015/16 (July 2015 – January 2016) were down five percent from the same period last year. This can largely be attributed to an increase in domestic production of over 100,000 MT in 2015. As a result, it is expected that food wheat imports will decrease slightly in MY2015/16. On the other hand, feed wheat imports are expected to be similar to the previous year, supported by an attractive price - the lowest since MY2006/07 - which is competitive against feed corn. Accordingly, the total wheat imports in MY2015/16 are expected to decrease to 5.7 million MT. For MY2016/17, with an expected decrease in feed wheat imports and a return to normal domestic production levels, total imports are forecast to remain at 5.7 million MT.

1) Food Wheat: Direct Purchase by MAFF

MAFF purchases different types of food quality wheat, mainly from the United States, Canada and Australia, to best meet the needs of Japanese users.

Dark Northern Spring (DNS) and Western Red Spring (1CW) are used for bread making. In the first half of MY2015/16, imports of 1CW exceeded DNS imports due to 1CW's higher cost-benefit performance.

MAFF controls both producer and resale prices of domestic wheat, as well as the resale price of imported wheat. MAFF buys imported wheat at international prices and sells it to domestic flour millers at a markup. Reflecting abundant global supply and a decline in freight costs, the average GOJ resale price of five major classes of wheat for October 2015 – March 2016 and April 2016 – September 2016 dropped 5.7 percent and 7.1 percent respectively from the previous six months.

2) Food Wheat: SBS Imports

MAFF has conducted an SBS system for food quality wheat since April 2007 to allow for greater flexibility and transparency in a portion of the food quality wheat imports.

3) Feed Wheat: SBS Imports

MAFF also imports wheat for feed use under the SBS system. Reflecting weaker demand than the previous year, MAFF reduced the JFY2015 allocation for SBS feed wheat to 680,000 MT, from 900,000 MT in JFY2014. As of March 10, 2016, forty-two SBS tenders had been conducted, through which 297,888 MT of wheat was contracted.

As a result of the Japan-Australia Economic Partnership Agreement, effective January 15, 2015, imports of Australian feed wheat and feed barley have been liberalized so that companies can negotiate prices and import directly from Australia. To date, there have been no feed wheat imports from Australia since MY2013/14.

Stock

As a contingency plan, a total of 940,000 MT of imported wheat, equivalent to 2.3 months demand, is held in reserve, of which the GOJ holds 1.8 months' worth, and the remainder is held by the private sector. For JFY2016, the reserve target is expected to remain unchanged at 940,000 MT.

Rice

Rice, Milled

2014/2015

2015/2016

2016/2017

Market Begin Year

Nov-14

Nov-15

Nov-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

1608

1608

1610

1586

0

1580

Beginning Stocks

3108

3108

3212

2822

0

2395

Milled Production

7842

7849

7900

7653

0

7680

Rough Production

10772

10782

10852

10513

0

10550

Milling Rate (.9999)

7280

7280

7280

7280

0

7280

MY Imports

650

635

700

700

0

700

TY Imports

650

688

700

700

0

700

TY Imp. from U.S.

0

320

0

0

0

0

Total Supply

11600

11592

11812

11175

0

10775

MY Exports

80

70

75

80

0

85

TY Exports

75

65

75

75

0

80

Consumption and Residual

8308

8700

8375

8700

0

8700

Ending Stocks

3212

2822

3362

2395

0

1990

Total Distribution

11600

11592

11812

11175

0

10775

(1000 HA) ,(1000 MT)

Production

Although low temperatures, a lack of sunshine and a typhoon during the grain-filling period affected rice yield in some regions, the 2015 crop overall achieved 5.3 MT/ha, the average yield of recent years. However, as the planted area decreased 1.4 percent and the yield was 0.1 MT/ha lower than 2014, total production was down 2.5 percent, to 7.65 million MT (milled basis). Due to declining table rice consumption, MAFF incentivizes the shift of production from table rice to feed rice. As a result, feed rice production increased 136 percent in 2015 from the previous year to 383,180 MT (milled), while table rice production decreased 400,400 MT (milled) to 6.7 million MT (milled).

MAFF operates the rice acreage reduction (Gentan) program. Those who produce table rice in compliance with a production plan set by MAFF receive a subsidy of 7,500 yen/ 10 are. Even under the rice acreage reduction program, the private June stock level has been over two million MT in recent years. In JFY2015, to reduce table rice production while utilizing rice paddies, MAFF incentivizes production of rice for feed with subsidies such that income is equal to or higher than income for producing table rice. In addition to these subsidies, many municipal governments provide subsidies for production of rice for feed. Increasing yield and reducing production costs are the major challenges for feed rice production, and MAFF encourages improvement in yield by setting subsidy levels according to the yield. MAFF set a target of increasing feed rice production to 1.1 million MT by 2025. With the continuation of subsidies, rice for feed production is expected to further increase in 2016 with a slightly higher yield, offsetting a decrease in table rice production, resulting in total rice production forecast to remain at the 2015 level of 7.7 million MT (milled).

MAFF's subsidy for feed rice production

Direct Payment for Full Utilization of Rice Paddies

Subsidy is provided according to the yield.

- 55,000 yen/ 10 are for yield up to 380 kg/10 are

- 55,000 yen plus 167 yen/ kg for yield between 381 kg/10 are and 689 kg/10 are (eg., for the average yield of 530 kg/ 10 are, 80,000 yen/10 are)

-105,000 yen/10 are for yield of 680 kg/ 10 are or over

Planting high yield varieties

12,000 yen/10 are

Producers in prefectures which produced less than MAFF's allocated volume.

5,000 yen/ 10 are

Consumption

Consumption of table rice has been trending down at a rate of approximately 80,000 MT annually due to a decline in population and per capita consumption. MAFF forecast that table rice consumption will decrease to 7.71 million MT for MY2015/16 and 7.62 million MT for MY2016/17. On the other hand, rice used in compound feed has increased significantly in the last two years and exceeded over one million MT in MY2014/15. To date, Minimum Access (MA) rice and GOJ reserve rice have accounted for the majority of rice used for feed, but in accordance with the increase in feed rice production in 2015 and an expected increase in 2016, use of rice in feed is expected to expand further and offset a decrease in table rice consumption. Thus, total rice consumption is expected to be flat in MY2015/16 and MY2016/17, at 8.7 million MT (milled).

As 7.4 million MT of table rice production in 2015 was smaller than MAFF's estimated table rice demand of 7.7 million MT, MAFF expects that private stocks (excluding stocks of MA rice and the GOJ reserve) in June 2016 to decrease to 2.07 million MT, from 2.26 million MT in June 2015. With the estimated decrease in private stocks, the price of the 2015 crop has risen from the 2014 crop price, but is still lower than the prices seen in 2013 or earlier. However, as observed in 2014/15, lower prices do not appear to have a noticeable positive impact on the consumption of table rice.

Trade

Imports

Since tariffication of rice in JFY2000, the GOJ's Minimum Access commitment has been set at 7.2 percent of total domestic consumption, i.e., 682,000 MT (milled basis). For JFY2014, due to a reduced price for domestic rice, demand for imported rice was low, resulting in only 11.2 percent - or 11,606 MT - of the planned quantity of 100,000 MT contracted under the SBS tender system. Demand for imported rice continues to be sluggish in the SBS tenders for JFY2015, with 29,000 MT contracted as of March 3, 2016 and the remaining 70,000 MT expected to be transferred to OMA tenders. However, with the increased price of the 2015 domestic rice and a shortage of food service grade rice, demand for imported rice is expected to improve in 2016.

Exports

Japan exports a small amount of rice to Asian countries, such as Hong Kong, Singapore and Taiwan, targeting Japanese residents there. Boosted by the Washoku boom overseas, more producers and companies exported rice in recent years; rice exports increased 65 percent to 6,921 MT in MY2014/15 and are expected to increase gradually in the coming years. In addition to those commercial exports, Japan exports rice for food aid using MA rice. According to the Japan Customs, its trade statistics does not include any goods of gift (free of charge) in exports. Post estimates that Japan's total rice exports are larger than the trade statistics, if exports for food aid are included.

Stock

The GOJ held 910,000 MT of rice as reserve and 730,000 MT of MA rice stocks at the end of October 2015. It is estimated that stocks in the private sector were around one million MT in October 2015. With an expected increase in feed utilization, ending stocks in MY2015/16 and MY2016/17 are forecast to decrease from MY2014/15, to 2.4 million MT and 2 million MT respectively.

Barley

Barley

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct-14

Oct-15

Oct-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

60

60

61

61

0

61

Beginning Stocks

393

393

380

330

0

277

Production

170

170

177

177

0

172

MY Imports

1097

1097

1300

1100

0

1100

TY Imports

1097

1097

1300

1100

0

1100

TY Imp. from U.S.

71

87

0

0

0

0

Total Supply

1660

1660

1857

1607

0

1549

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

950

950

1100

950

0

930

FSI Consumption

330

380

330

380

0

380

Total Consumption

1280

1330

1430

1330

0

1310

Ending Stocks

380

330

427

277

0

239

Total Distribution

1660

1660

1857

1607

0

1549

(1000 HA) ,(1000 MT)

Production

Aggregate barley production in Japan in 2015 was up 4.2 percent from 2014 to 176,900 MT due to an above-average yield, thanks to favorable weather conditions, and an increase in planted area for six-row barley and tow-row barley offsetting declines in the planted area and yield for naked barley. The planted area is expected to remain unchanged in 2016, and the production volume is forecast to decline three percent, assuming average yield, to 172,000 MT.

Consumption

Aggregate annual barley (feed and food) consumption is estimated to be flat at approximately 1.3 million MT. In recent years, barley for FSI consumption has been stable at around 380,000 MT; 330,000 MT is used for manufacturing barley tea, miso (soybean paste), shoshu (Japanese distilled liquor) and beer, and 50,000 MT for beer supplied domestically by contracted production. There is little indication that barley for these non-feed uses will increase in the near future.

On the other hand, barley for feed consumption has been gradually declining. Unlike corn, which is used for all livestock species, barley is consumed almost entirely by cattle and swine, of which over 80 percent is consumed by beef cattle. With declining cattle and swine numbers, barley used in compound feed has been decreasing, with the exception of MY 2012/13 when corn prices soared. Barley for feed consumption is expected to remain unchanged in MY2015/16 as cattle numbers are expected to decrease but swine numbers are expected to increase slightly in 2016. However, assuming cattle numbers continue to decline, a marginal decrease in feed consumption is forecast for MY2016/17.

Trade

Along with rice and wheat, barley is a state traded commodity; imports are controlled by MAFF, except for feed barley from Australia, which was liberalized as a result of the Japan-Australia Economic Partnership Agreement that was implemented in January 2015. In MY2014/15, barley imports dropped 15 percent from the previous year due to weak demand for barley for feed. Reflecting this weak demand, MAFF lowered the planned import volume for feed barley from 1.288 million MT to one million MT for JFY2015, of which about 310,000 MT was assumed by MAFF to be imported from Australia by the private sector, and thus 690,000 MT was initially set as MAFF's import volume. However, because of high prices, imports from Australia were smaller than MAFF expected, and instead, competitively priced feed barley from Europe, Russia and Black Sea countries outpaced Australian barley. To allow more barley to be imported from these countries this fiscal year, in November 2015, MAFF raised the state import volume for JFY2015 to 1,000,000 MT. As feed and food consumption is expected to remain unchanged, total barley imports are expected to stay at around 1.1 million MT in MY2015/16. For MY2016/17, although a marginal decrease in feed consumption is forecast, Post forecasts total imports to remain at the MY2015/16 level.

SBS Feed Barley Import Contracts (MT)

JFY2012

JFY2013

JFY2014

JFY2015*

MAFF planned purchase volume

1,288,000

1,288,000

1,288,000

690,000 1,000,000*

Volume contracted

1,051,630

995,805

909,977

544,527**

*MAFF revised the volume from 690,000MT to one million MT in November 2015

** From April 2015 to March 11, 2016

Stock

The GOJ does not hold emergency stocks for barley.

Sorghum

Sorghum

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct-14

Oct-15

Oct-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

51

51

24

24

0

74

Production

0

0

0

0

0

0

MY Imports

903

903

950

900

0

850

TY Imports

903

903

950

900

0

850

TY Imp. from U.S.

75

113

0

0

0

0

Total Supply

954

954

974

924

0

924

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

930

930

900

850

0

850

FSI Consumption

0

0

0

0

0

0

Total Consumption

930

930

900

850

0

850

Ending Stocks

24

24

74

74

0

74

Total Distribution

954

954

974

924

0

924

(1000 HA) ,(1000 MT)

Production

Production of sorghum is negligible in Japan.

Consumption

Almost all sorghum is used for feed, of which 90 percent is consumed by the swine and poultry sectors. Use of sorghum in compound feed adjusts depending on the availability and price of corn and, recently, rice. In MY2014/15, use of rice in feed expanded significantly cutting into the shares of sorghum and corn in feed to a notable extent. An anticipated expansion of rice used in compound feed is expected to lower sorghum use in feed in MY2015/16. Accordingly, despite an expected marginal increase in swine numbers, sorghum for feed consumption is expected to decrease to 850,000 MT. As use of rice in feed is forecast to be robust, supported by the feed rice subsidy, Post forecasts sorghum consumption will remain at around 850,000 MT in MY2016/17.

Trade

Imports of sorghum declined 10 percent in MY2014/15 from the previous year, corresponding to a roughly 100,000 MT decline of sorghum used in compound feed. Japan's sorghum imports largely depend on sorghum's price relative to corn and other feed ingredients. Although the price of sorghum was competitive vis-a-vis corn in the first four months of MY2015/16, imports were much slower than the previous year. However, assuming sorghum prices remain attractive throughout MY2015/16, it is anticipated that imports of sorghum will reach 900,000 MT, the same level as MY2014/15. However, an expected decline in feed demand for sorghum is forecast to lower imports in MY2016/17, to 850,000 MT.

Stocks

Post estimates the current government and commercial stocks will remain constant at less than 100,000 MT.

Rye

Production

Production of rye is minimal in Japan.

Consumption

The majority of rye in Japan is used for feed, mainly mixed feed and cattle feed. As rye is typically considered a marginal ingredient in feed, demand is highly susceptible to the supply situation and price of rye relative to other ingredients. Due to a decline in the cattle population and the low price-competitiveness of rye over corn, sorghum and wheat, rye used in compound feed decreased in MY2014/15. For MY2015/16, due to an expected continuing decline in cattle numbers coupled with the high price of rye, demand for rye in feed is expected to decrease to 13,000MT. Although it is still a niche market, rye demand for making bread and granola has been increasing in recent years with the popularity of health-conscious food. Reflecting increasing demand, Post estimates that rye for FSI consumption was around 8,000MT in MY2014/15. Rye for food demand is forecast to continue to be robust, and the FSI consumption level is forecast to remain unchanged in MY2015/16 and MY2016/17.

Trade

Japan's total imports of rye dropped 41 percent in MY2014/15 due mainly to higher prices compared to MY2013/14, which resulted in lower feed demand. For MY2015/16, imports of rye are expected to decrease to 20,000MT because a marginal decline in feed consumption is expected. The import level is forecast to remain flat in MY2016/17.

Stocks

Japan does not hold strategic emergency stocks of rye. Commercial stocks are estimated to be minimal.