According to MAFF, the total supply of vegetable oil in CY 2014 was roughly 2.47 million MT, including 1.67 million MT from domestic production and 0.71 million MT from imports. Japanese demand for vegetable oil has increased dramatically since the 1960s, as the Japanese diet has steadily shifted more towards a Western-style diet. While the composition of Japanese vegetable oil utilization has changed significantly over the last ten years, vegetable oil demand and utilization patterns appear to have finally reached a stable equilibrium.

Demand and Supply of Vegetable Oil (1,000 MT)

CY

2010

2011

2012

2013

2014*1

Demand

Domestic demand

2,330

2,311

2,319

2,326

2,340

Export*2

11

8

11

11

11

Total

2,341

2,319

2,330

2,337

2,351

Supply

Initial stock

119

109

128

124

121

Domestic production

Soybean oil

468

401

377

380

392*3

Rapeseed oil

993

1,027

1,064

1,044

1,074*3

Other oil

196

207

199

198

199*3

Total

1,656

1,635

1,640

1,622

1,665

Import*2

675

703

686

712

705

Total

2,450

2,447

2,454

2,458

2,491

Year-end stock

109

128

124

121

140

Source: MAFF; *1 MAFF estimate; *2 Temperate products include oil from soybean, rapeseed, mustard, rice, cotton seed, safflower, sesame, corn, peanut and sunflower; *3 Actual

While soybeans have historically dominated the Japanese oil crushing market, rapeseed oil production has outpaced soybean oil since 1988. However, since rapeseeds produce more than twice as much oil as soybeans pound-for-pound, it wasn't until 2011 that total rapeseed consumption surpassed soybeans for the first time. Since reaching peak production of 1.89 million MT in 2000, Japanese vegetable oil production has been on a downward trend due to declines in human and livestock populations as well as competition from lower-priced tropical oil imports; the volume of imported palm oil first exceeded the production of soybean oil in Japan in CY 2008. Though imported palm oil helped to displace significant volumes of soybean oil in the Japanese market between 2005 and 2010, annual Japanese imports of palm oil have leveled off to between 550,000 and 600,000 MT over the last five years.

Though exchange rate movements have largely mitigated potential gains from recent declines in global soybean prices, Post anticipates Japanese soybean oil production to be roughly flat at 389,000 MT MY 2014/15 and 390,000 MT MY 2015/16, as relatively high prices for imported soybean meal drive improved soybean crushing profitability. With Canadian rail transportation issues resolved and Japanese rapeseed imports rebounding in MY 2014/15, Post projects rapeseed oil production will bounce back to 1,075,000 MT in MY 2014/15 and MY 2015/16.

Japanese imports of soybean oil and rapeseed oil have been negligible as the crushing industry is protected by high tariffs on imported soybean and rapeseed oils; the tariff for both products is either 10.9 yen/kg or 13.2 yen/kg depending on the acid value. Post forecasts that imports of soybean and rapeseed oils will continue to be minor relative to consumption at approximately 30,000 MT and 10,000 MT respectively in MY 2014/15 and MY 2015/16.

The rise of palm oil to its current position as the second most commonly utilized oil in Japan began with the signing of Japan's Economic Partnership Agreements with Malaysia (in 2005) and Indonesia (in 2008), which granted duty free access to palm oil. Following passage of the EPA agreements, the CIF price for palm oil in Japan was approximately 60 to 70 percent of the price of domestically produced soybean oil. Given its advantageous properties for shelf-stability and institutional scale frying, palm oil quickly displaced temperate oils in suitable applications. However, the significant refining process required to neutralize palm oil's reddish color and less palatable aroma strips the oil of any particular flavor, while its high melting point, which renders the product solid at room temperature, further limits its attractiveness in the retail market, which accounts for 16 percent of total vegetable oil utilization. Though palm oil had once been used in the manufacture of various industrial products such as soap, detergent, industrial lubricant, resin paint, and cosmetics, cost effective fatty acids and processed products with similar properties have replaced palm oil, limiting the market for industrial consumption, creating a virtual ceiling on the potential demand for additional volumes of palm oil in the Japanese market. As such, Post anticipates that imports of tropical oils will be stable in MY 2014/15 and MY 2015/16.

End uses for high oleic sunflower seed oil include food production, cosmetics and other industrial applications that benefit from its high oxidative stability; high oleic sunflower seed oil is most commonly used as a substitute for cacao butter. The United States and Argentina have been the major suppliers of sunflower seed oil to Japan over the last ten years. The total imports from these two countries account for 72 percent of Japan's imports in MY 2013/2014. Based on recent trends, Post anticipates Japan will import around 30,000 MT in MY 2014/15 and MY 2015/16.

Japan's tariff on major oilseeds and oils (as of January 2015)

HS Code

Commodity

Duty

1201.10,.90

Soybeans

Free

1205.10,.90

Rapeseed

Free

1507.10-100

Soybean oil, crude, of an acid value exceeding 0.6

10.9 yen/kg

1507.10-200

Soybean oil, crude, other

13.2 yen/kg

1507.90-000

Soybean oil, other

13.2 yen/kg

1508.10-100

Peanut oil, crude, of an acid value exceeding 0.6

8.5 yen/kg

1509 & 1510

Olive oil

Free

1511.10-000

Palm oil, crude, EPA preferential rate for Malaysia and Indonesia

Free

1511.90-010

Palm stearin, EPA preferential rate for Malaysia and Indonesia

Free

1511.90-090

Palm oil, other, EPA preferential rate for Malaysia and Indonesia

Free

1512.11-110

Sunflower-seed oil, crude, of an acid value exceeding 0.6

8.5 yen/kg

1512.11-210

Safflower oil, crude, of an acid value exceeding 0.6

8.5 yen/kg

1512.11-120

Sunflower-seed oil, crude, other

10.4 yen/kg

1512.11-220

Safflower-seed oil, crude, other

10.4 yen/kg

1512.19-010

Sunflower-seed oil and its fractions

10.4 yen/kg

1514.11-100

Low erucic acid rapeseed oil, crude, of an acid value exceeding 0.6

10.9 yen/kg

1514.11-200

Low erucic acid rapeseed oil, crude, other

13.2 yen/kg

1514.19-000

Low erucic acid rapeseed oil, other

13.2 yen/kg

1514.91-100

Rapeseed oil, other, crude, of an acid value exceeding 0.6

10.9 yen/kg

1514.91-200

Rapeseed oil, other, crude, other

13.2 yen/kg

2301.20

Fish meal

Free

2304.00

Soybean meal

Free

2306.41,.49

Rapeseed meal

Free

Source: Japan Tariff Association

Production, Supply and Demand Data Statistics:

Oil, Soybean

2013/2014

2014/2015

2015/2016

Market Begin Year

Oct 2013

Oct 2014

Oct 2016

Japan

USDA Official

New post

USDA Official

New post

USDA Official

New post

Crush

1,940

1,969

1,970

1,970

0

1,970

Beginning Stocks

24

24

21

35

0

44

Production

375

389

381

389

0

390

MY Imports

16

16

15

30

0

30

MY Imp. from U.S.

2

3

1

5

0

5

MY Imp. from EU

0

0

0

0

0

0

Total Supply

415

429

417

454

0

464

MY Exports

0

0

0

0

0

0

MY Exp. to EU

0

0

0

0

0

0

Industrial Dom. Cons.

35

35

35

35

0

35

Food Use Dom. Cons.

359

359

363

375

0

375

Feed Waste Dom. Cons.

0

0

0

0

0

0

Total Dom. Cons.

394

394

398

410

0

410

Ending Stocks

21

35

19

44

0

54

Total Distribution

415

429

417

454

0

464

1000 MT, PERCENT

Oil, Rapeseed

2013/2014

2014/2015

2015/2016

Market Begin Year

Oct 2013

Oct 2014

Oct 2015

Japan

USDA Official

New post

USDA Official

New post

USDA Official

New post

Crush

2,370

2,400

2,450

2,450

0

2,450

Beginning Stocks

118

118

116

160

0

204

Production

1,010

1,054

1,012

1,075

0

1,075

MY Imports

10

10

10

10

0

10

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

1,138

1,182

1,138

1,245

0

1,289

MY Exports

2

2

1

1

0

1

MY Exp. to EU

0

0

0

0

0

0

Industrial Dom. Cons.

60

60

60

60

0

60

Food Use Dom. Cons.

960

960

965

980

0

1,000

Feed Waste Dom. Cons.

0

0

0

0

0

0

Total Dom. Cons.

1,020

1,020

1,025

1,040

0

1,060

Ending Stocks

116

160

112

204

0

228

Total Distribution

1,138

1,182

1,138

1,245

0

1,289

1000 MT, PERCENT

Oil, Sunflowerseed

2013/2014

2014/2015

2015/2016

Market Begin Year

Oct 2013

Oct 2014

Oct 2015

Japan

USDA Official

New post

USDA Official

New post

USDA Official

New post

Crush

0

0

0

0

0

0

Extr. Rate, 999.9999

0

0

0

0

0

0

Beginning Stocks

5

5

5

5

0

5

Production

0

0

0

0

0

0

MY Imports

28

28

30

30

0

30

MY Imp. from U.S.

15

10

15

15

0

15

MY Imp. from EU

0

5

0

5

0

5

Total Supply

33

33

35

35

0

35

MY Exports

0

0

0

0

0

0

MY Exp. to EU

0

0

0

0

0

0

Industrial Dom. Cons.

0

0

0

0

0

0

Food Use Dom. Cons.

28

28

30

30

0

30

Feed Waste Dom. Cons.

0

0

0

0

0

0

Total Dom. Cons.

28

28

30

30

0

30

Ending Stocks

5

5

5

5

0

5

Total Distribution

33

33

35

35

0

35

1000 MT, PERCENT

CY: Calendar Year

JFY: Japanese Fiscal Year (April – March next year)

MY: Market Year for oilseeds, meal made from oilseeds, oil: October – September next year

MY for fish meal: January – December

Conversion Ratio: Oil : Meal (weight basis)

- Soybean: 0.1975 : 0.7563

- Rapeseed: 0.4388 : 0.5551