Report Highlights:

On Thursday, May 28, 2015, the Japanese Ministry of Agriculture, Forestry, and Fisheries (MAFF) announced plans to import 10,000 metric tons (MT) of butter and 5,000 MT of non-fat dry milk (NFDM) in Japanese fiscal year (JFY) 2015. Japan's Agriculture and Livestock Industries Corporation (ALIC) will import these products in addition to Japan's required JFY 2015 current access import volume, most of which has already been allocated to butter (2,800 MT), NFDM (10,000 MT), and whey (2,500 MT). Japan has conducted additional dairy imports in five out of the last eight years.

General Information:

Earlier in 2015, MAFF announced that it would wait until May to determine the need for imports in excess of current access commitments. As a result of the Uruguay Round of GATT/WTO negotiations, Japan is obligated to import 137,200 MT (on a milk equivalent basis) of designated dairy commodities, including: nonfat dry milk, butter, butter oil, dairy spread, whey and modified whey for food use. Days after J-Milk (the national industry association representing Japanese dairy producer cooperatives, dairy product manufacturers and merchandizers of milk and dairy products) released its annual production estimates, on May 28, 2015, MAFF announced that additional imports would be required in JFY 2015 in order to ensure a "stable supply" of butter during the winter holidays (Japan's peak consumption period) and to prepare for unexpected contingencies that could negatively impact production prospects (e.g. a hotter than average summer, as occurred in 2014, reducing the volume of fluid milk for processing). Japanese Fiscal Year 2015 is from April 1, 2015 through March 30, 2016. Announced ALIC dairy import volumes for JFY 2015 are listed in the table below.

JFY 2015 Dairy Import Commitment Volumes(Metric Tons)

Butter

NFDM

Whey

Butter Oil

Dairy Spread

Current Access Imports

SBS Tender Volume

1,680

6,000

4,500

200

330

Ordinary Tender Volume

1,120

4,000

Subtotal

2,800

10,000

4,500

200

330

Additional Imports

SBS Tender Volume

5,600

0

Ordinary Tender Volume

4,400

5,000

Subtotal

10,000

5,000

Total Import Volume

12,800

15,000

2,500

200

330

The additional import volumes announced by MAFF reflect the continuing supply deficit of fluid milk for processing use as well as the significant public criticism that MAFF suffered this past winter when butter was noticeably absent from grocery store shelves. While MAFF estimates of total butter consumption in JFY 2014 were fairly accurate, the tender timeline was not properly synced with consumption patterns, which, combined with reported hoarding by small businesses, led to the average consumer's experience of a butter shortage.

Last winter's negative public reaction was the likely impetus for ALIC creating a new tender category for smaller packages of 1-5 kg in JFY 2015. The new tender category specifies two delivery options: bulk butter to be repackaged into 1-5 kg packages at domestic factories after importation; and direct importation of 1-5 kg packages. Typically, ALIC tendered butter is delivered in 10 kg, 15 kg, 20 kg or 25 kg packages. This category is intended to improve wholesale distribution to the numerous smaller scale bakeries and confectionary shops that were reportedly buying butter from retail shelves last winter. It is notable that this specific tender category was initially created as a 280 MT 'pilot program' within the 2,800 MT JFY 2015 current access butter tenders (announced in January 2015), and then expanded to 2,000 MT (out of the 10,000 MT total) of the additional butter import volume before the 280 MT had even been delivered. In addition, MAFF and ALIC have taken further steps to prevent another consumer butter crisis in JFY 2015, by increasing the frequency of its market supply-demand assessments and by accelerating the delivery timeline for tendered butter to ensure that it arrives well ahead of the peak consumption period (typically October through December).

Summary Table for JFY 2011 - 2015

Unit: Metric Ton

Current Access

JFY 2011

Milk Equivalent Volume

JFY 2012

Milk Equivalent Volume

JFY 2013

Milk Equivalent Volume

JFY 2014

Milk Equivalent Volume

JFY 2015

Milk Equivalent Volume

Butter

7,459

92,044

7,459

92,044

3,500

43,190

3,000

37,020

2,800

34,552

NFDM

0

0

0

0

8,768

56,817

9,178

59,473

10,000

64,800

Dairy Spread

800

9,872

800

9,872

225

2,777

500

6,170

330

4,072

Butter Oil

300

4,545

300

4,545

242

3,666

250

3,788

200

3,030

Whey/Prepared Whey

4,500

30,780

4,500

30,780

4,500

30,780

4,500

30,780

4,500

30,780

Subtotal

137,241

137,241

137,229

137,231

137,234

Japan's Additional Importation of Designated Dairy Commodities

JFY 2011

Milk Equivalent Volume

JFY 2012

Milk Equivalent Volume

JFY 2013

Milk Equivalent Volume

JFY 2014

Milk Equivalent Volume

JFY 2015

Milk Equivalent Volume

Butter

2,000

24,680

2,000

24,680

0

0

10,000

123,400

10,000

123,400

NFDM

0

0

0

0

0

0

10,000

64,800

5,000

32,400

Subtotal

2,000

24,680

2,000

24,680

0

0

20,000

188,200

15,000

155,800

Grand Total

161,921

161,921

137,229

325,431

293,034

Milk Equivalent Conversion Coefficient:

Butter

12.34

NFDM

6.48

Dairy Spread

12.34

Butter Oil

15.15

Whey Powder

6.84