​Japan. Grain and Feed Update. July 2015 July 25, 2015

Report Highlights:

Overall feed production in Japan continues to be stable, but is gradually trending down and is expected to be below 24 million metric tons in MY2014/15. While corn utilization in feed remains stable at around 44.5 percent in MY 2014/15, the use of rice and DDGS has increased notably.

Overall Market Situation

As shown in the table below, the stagnant trend in the livestock population continues, and feed demand is expected to decline slowly but steadily in the coming years.

Japan's Livestock and Poultry Population (Unit: 1,000 head)

Source: MAFF (as of February each year)

** FAS/Tokyo forecast

*** Layers includes chicks

* MAFF resumed its official survey in 2013. The results cannot be directly compared to previous surveys, however, due to a change in survey methodology.

Up-to-date feed production statistics and a detailed breakdown of feed ingredient utilization follow. As corn has been the largest ingredient in feed, Feed Utilization by Ingredient, has been revised to reflect the corn marketing year of October/September.

Due to the decreased size of the domestic livestock population, Japanese feed production (compound and mixed feed) dipped below the 24 million metric ton (MT) level in MY2013/14 for the first time since MY2004/05. At the current pace, feed production in MY2014/15 is expected to remain at a similar level, i.e., slightly below 24 million MT. With the Ministry of Agriculture, Forestry and Fisheries (MAFF)'s strong push to use rice for feed, rice utilization in feed has increased to around five percent in recent months, at the expense of corn and wheat.

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. During the fourth quarter (January – March 2015) of Japanese Fiscal Year (JFY) 2014 (April 2014 – March 2015), the average price of imported raw materials for compound feed increased by 812 yen per metric ton - from 33,199 yen/MT to 34,011 yen/MT.

Because of this gap, an 800 yen/MT differential was paid as compensation, consistent with the amount paid in the previous fiscal year's third quarter. During these third and fourth quarters, prices of the key feed ingredients such as corn and soy meal were lower at the Chicago Board of Trade than the prices during the same period of the previous years. Notwithstanding that situation, import prices in Japan for those commodities rose in yen terms due to the depreciation of the yen against the dollar by about 15 percent over that timeframe.

Production, Supply and Distribution Estimates for Japan, Corn

Of the total demand for corn in Japan, roughly 75 percent comes from the feed sector, and 25 percent comes from the food sector, mainly from starch manufacturers. Despite the decline in utilization over recent years, corn continues to be the largest ingredient in compound feed in Japan, but as noted above, expansion of rice utilization in feed rations, as a result of MAFF subsidy incentives, is expected to result in a slightly lower corn consumption level for feed in MY2014/15; this downward trend is forecast to continue for MY2015/16. Starch production is expected to be stable but a slightly lower demand from the soft drink production sector is anticipated, reflecting a demographic shift in preferences in MY2014/15 and MY2015/16. Accordingly Post's estimate for feed and FSI consumption and imports has been slightly lowered in MY2014/15 and MY2015/ in the revised PS&D.

Between November 2014 and March 2015, as a result of abundant supplies, Brazil increased its feed corn exports to Japan, taking some market share from U.S. feed corn in the Japanese market. The subsequent recovery in supply in the United States has contributed to a recovery in U.S. import market share in Japan to over 90 percent in the April and May 2015 timeframes.