PS&D

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Jul 2013

Jul 2014

Jul 2015

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

213

210

213

213

0

213

Beginning Stocks

1,543

1,543

1,309

1,339

0

1,418

Production

812

812

849

849

0

800

MY Imports

6,123

6,123

6,000

5,800

0

5,800

TY Imports

6,123

6,123

6,000

5,800

0

5,800

TY Imp. from U.S.

2,928

2,967

0

2,900

0

Total Supply

8,478

8,478

8,158

7,988

0

8,018

MY Exports

269

269

300

270

0

270

TY Exports

269

269

300

270

0

270

Feed and Residual

1,000

700

600

400

0

400

FSI Consumption

5,900

6,170

5,900

5,900

0

5,900

Total Consumption

6,900

6,870

6,500

6,300

0

6,300

Ending Stocks

1,309

1,339

1,358

1,418

0

1,448

Total Distribution

8,478

8,478

8,158

7,988

0

8,018

Yield

3.8122

3.8667

3.9859

3.9859

0.0000

3.7559

Production in 2014 Up 4.6 Percent

With generally favorable weather conditions in all the major growing regions in 2014, yield increased two percent in Hokkaido, which produces 65 percent of Japan's wheat supplies, and six percent in other growing areas. This above average yield combined with an increase in total planted area to push 2014 wheat production up 4.6 percent over 2013. Since wheat is an alternative crop to rice in some areas, Post forecasts planted area for wheat will increase slightly in 2015 as planted area for rice is expected to shrink. Despite this increase in area, assuming average yield, production volume is forecast to decline by 6 percent.

Japan's Wheat Production

Planted Area

Production

Yield

(hectares)

(MT)

(MT/ha)

2009

208,300

674,200

3.24

2010

206,900

571,300

2.76

2011

211,500

746,300

3.53

2012

209,200

857,800

4.10

2013

210,200

811,700

3.86

*2014

212,600

849,100

3.99

**2015

213,000

800,000

3.76

Source: MAFF

*Preliminary

**FAS/Tokyo forecast

Food Wheat Consumption Steady, Feed Use Decreases

Consumption of food wheat has been relatively flat over the last three decades, at around 32 kilograms per capita. Combined with the wheat equivalent of wheat product imports of 200,000 to 300,000 metric tons, Japan's aggregate food wheat demand is expected to remain flat at 5.9 million metric tons in MY 2014/15 and MY2015/16. With a decline in the price of corn, Japanese imports of feed wheat gradually decreased in MY2013/14 from the record high level in MY2012/13. In the past, Japanese feed millers were reluctant to change the composition of feed ingredients. However, over the last three years, the Japanese feed industry increased the use of wheat in feed and discovered that it did not affect livestock production. Therefore, as long as the price of wheat is reasonably attractive, feed millers are expected to continue using wheat at higher than historical levels, with a utilization ratio around 1.5 ~ 1.7 percent, or 400,000 MT per year.

As a result, Post estimates overall consumption of wheat to be 6.3 million MT in MY2014/15 and MY2015/16.

Wheat Imports

All food quality wheat is imported by MAFF through 1) direct purchase of food wheat and 2) SBS imports of food wheat. Assuming steady food wheat demand and domestic production, Post estimates that imports will remain unchanged in MY2014/15 and MY2015/16.

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.

Types of Wheat Imported under State Trading and Their Uses (Unit: MT)

Brand

Use

MY2013

*MY2014

U.S. Western White (WW)

Confectionery products

640,307

669,428

U.S. Hard Red Winter (HRW)

Bread and Chinese noodles

836,456

685,587

U.S. Dark Northern Spring (DNS)

Bread and Chinese noodles

1,001,600

981,398

Canada Western Red Spring #1 (1CW)

Bread

1,401,434

985,155

Australia Standard White (ASW)

Japanese noodles

790,933

698,770

Other (WC, SRW, APW)

Substitute for WW

27,170

Total

4,697,900

4,020,338

Source: MAFF

*July2014 – February 2015

On the basis of planned arrival in Japan at the time of contract

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. That markup ratio fluctuated between 1.3 and 1.6 over the last two years. MAFF reportedly intends to maintain this rate at around 2 to 1, meaning MAFF sells imported wheat at twice the purchase price. For further details of how this system works.

GOJ Resale Prices of Imported Wheat (Yen/MT)

Yen/MT

Change from previous price

Oct 2010 - Mar 2011

47,860

Apr 2011 - Sept 2011

56,710

18.5%

Oct 2011 - Mar 2012

57,720

1.8%

Apr 2012 - Sept 2012

48,780

-15.5%

Oct 2012 - Mar 2013

50,130

2.8%

Apr 2013 - Sept 2013

54,990

9.7%

Oct 2013 - Mar 2014

57,260

4.1%

Apr 2014 - Sept 2014

58,590

2.3%

Oct 2014 - Mar 2015

58,330

-0.4%

Apr 2015 - Sep 2015

60,070

3.0%

Source: MAFF

Average of five brands: WW, HRW, DNS, 1CW and ASW

The price includes 5% consumption tax until March 2014 and 8% consumption tax from April 2014

2) Food Wheat: SBS Imports

MAFF has conducted an SBS system for food quality wheat and barley since April 2007. The idea behind the SBS system is to allow for greater flexibility and transparency in a portion of the food quality wheat imports. However, MAFF still remains a "middle man" in the transaction.

MAFF holds SBS tenders under the following two categories.

Category I: Prime Hard and Durum

Category II: Any 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)

During the most recent complete Japanese fiscal year, JFY2013, a total of over 320,000 MT of wheat (Category I and II combined) was imported as shown below, up 25,000 MT from the previous year. The increase was primarily due to a recovery in Canadian Durum supply. In JFY 2014, over 260,000 MT has been contracted. Because of relatively expensive freight rates for containers, the amount of wheat imported by container (Category II) has been small.

SBS Imports of Food Wheat – JFY2013 and JFY2014, Unit: MT)

Apr-Sep

Oct 2013

JFY2013

Apr-Sept

Oct 2014

JFY2014

Country

Brand

Category

2013

~March 2014

Total

2014

~March 2015

Total

Australia

*Prime Hard

Category I

30,620

47,900

78,520

21,750

32,900

54,650

Category II

1,603

5,791

7,394

6,717

0

6,717

Australia Total

32,223

53,691

85,914

28,467

32,900

61,367

Canada

Durum

Category I

110,940

112,671

223,611

114,748

74,250

188,998

Category II

3,164

3,164

Canada Total

110,940

112,671

223,611

114,748

77,414

192,162

France

French

Category II

2,542

3,417

5,959

2,790

2,754

5,544

**Other

Other

Category II

2,151

4,530

6,681

4,740

880

5,620

Total

147,856

174,309

322,165

150,745

113,948

264,693

Source: MAFF

Contract basis

* As a result of the Japan-Australia Economic Partnership Agreement, as of January 15, 2015, Australian Hard Wheat and Premium White Wheat are able to be imported under SBS.

*"Other" includes organic HRS, organic Hard White, and Durum from the United States.

3) Food Wheat: Private Purchases

MAFF allows flour millers to import wheat outside of MAFF's control as long as they export an equivalent amount of wheat flour. Flour millers that successfully find export markets can import this so-called "free wheat" at global market prices.

4) Feed Wheat: SBS Imports

MAFF also imports wheat and barley for feed use under the SBS system. Reflecting weaker demand than the previous year, MAFF reduced the JFY2014 allocation for SBS feed wheat to 900,000 MT, from 1,070,000 MT in JFY2013. As of March 4, 2015, forty-two SBS tenders had been conducted, through which 348,200 MT of wheat was contracted. Total feed wheat imported in JFY2014 is expected to be approximately half the level of JFY2013. Imports of feed wheat significantly decreased in MY2013/14 from MY2012/13 as corn prices normalized. For MY2014/15, assuming the corn price continues to be competitive, imports of feed wheat are expected to fall below the MY2011/12 level, to around 400,000 MT.

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. As imports have not yet started under this new system, it is too early to assess the impact that this will have. However, considering that a similar amount of paper work to the SBS process, plus feed factory registration, is required for this new system, and the mark-up MAFF collects for feed wheat and feed barley is set at a minimum level – just enough to cover handling costs - how much the new system will benefit the feed industry is unknown.

SBS Imports of Feed Wheat (Unit: MT)

JFY2012

JFY2013

JFY2014

MAFF allocation

1,210,000

1,070,000

900,000

Volume contracted

826,560

711,690

348,200*

Source: MAFF

*April 2014 – February 2015

Feed Wheat Imports (annual series)

MY: July - June

Partner Country

Unit

Quantity

% Change

2009/10

2010/11

2011/12

2012/13

2013/14

MY2014 /MY2013

World

MT

136149

122609

577336

964696

650155

-32.61

Australia

MT

55129

59277

231759

295763

0

-100.00

Russia

MT

42059

0

19289

0

2608

-

Ukraine

MT

29269

12951

0

0

267740

-

Canada

MT

8206

39494

77674

264815

59789

-77.42

United States

MT

1486

10887

248614

404118

262364

-35.08

Serbia

MT

0

0

0

0

10893

-

Romania

MT

0

0

0

0

46761

-

Feed Wheat Imports (MY2014/15 to Date)

Monthly Series: 07/2014 - 01/2015

Partner Country

Unit

07/2014

08/2014

09/2014

10/2014

11/2014

12/2014

01/2015

Total

World

MT

50236

21512

27884

39923

35486

6930

12527

194498

United States

MT

50236

21512

27884

14011

0

0

10975

124618

Canada

MT

0

0

0

17949

13490

0

1552

32991

Moldova

MT

0

0

0

0

2792

4330

0

7122

Romania

MT

0

0

0

7963

19204

1293

0

28460

Russia

MT

0

0

0

0

0

1307

0

1307

Total imports of wheat, including wheat products, in MY2013/14 decreased by 7.2 percent to 6.1 million MT. The decrease is primarily owing to a significant drop in feed wheat imports as corn imports normalized. Given the flat aggregate demand for flour-based food products and an expected decrease in imports of feed wheat, total (feed and food) wheat imports in MY2014/15 are expected to decline slightly, to 5.8 million MT in MY2014/15. Assuming steady demand for food wheat and wheat products, total wheat imports in MY2015/16 are forecast to remain unchanged from MY2014/15.

Japan's Wheat Imports (annual series)

MY: July - June

Partner Country

Unit

Quantity

% Share

% Change

MY2014 /MY2013

2011/12

2012/13

2013/14

2011/12

2012/13

2013/14

World

MT

6116209

6343374

5880596

100.00

100.00

100.00

- 7.30

United States

MT

3545674

3429955

2935006

57.97

54.07

49.91

- 14.43

Canada

MT

1350656

1666426

1692096

22.08

26.27

28.77

1.54

Australia

MT

1197624

1241188

918917

19.58

19.57

15.63

- 25.96

Other

22255

5805

334577

0

0

0

56.64

Japan's Wheat Imports (MY2013/14 imports to date)

Monthly Series: 07/2014 - 01/2015

Partner Country

Unit

07/2014

08/2014

09/2014

10/2014

11/2014

12/2014

01/2015

Total

World

MT

526448

527837

527453

442058

458900

312542

409235

3204473

United States

MT

272283

166003

322987

270914

252528

129646

273053

1687414

Australia

MT

47984

127917

98487

56778

77521

42438

92633

543758

Canada

MT

206118

232988

104469

106403

106835

132903

42556

932272

Other

MT

63

929

1510

7963

22016

7555

993

41029

Japan's Wheat Product Imports (annual series)

MY: July - June

Partner Country

Unit

Quantity

% Share

% Change

MY2014/ MY2013

2011/12

2012/13

2013/14

2011/12

2012/13

2013/14

World

MT

173896

185943

176921

100.00

100.00

100.00

- 4.85

Italy

MT

82955

92540

82461

47.70

49.77

46.61

- 10.89

Turkey

MT

19587

27305

27888

11.26

14.68

15.76

2.14

United States

MT

22504

21873

23550

12.94

11.76

13.31

7.66

China

MT

18943

18297

17591

10.89

9.84

9.94

- 3.86

Korea South

MT

10859

8687

7029

6.24

4.67

3.97

- 19.08

Thailand

MT

6986

6137

5855

4.02

3.30

3.31

- 4.61

Greece

MT

3082

3124

3481

1.77

1.68

1.97

11.44

United Arab Emirates

MT

2622

1984

2196

1.51

1.07

1.24

10.66

Vietnam

MT

1469

1786

1939

0.84

0.96

1.10

8.53

Tunisia

MT

1725

976

1483

0.99

0.53

0.84

51.91

Other

MT

3163

3234

3447

0

0

0

0.066

Japan's Wheat Product Imports (MY2013/14 imports to date)

Monthly Series: 07/2014 - 01/2015

Partner Country

Unit

07/2014

08/2014

09/2014

10/2014

11/2014

12/2014

01/2015

Total

World

MT

15270

14381

14696

12441

12395

13775

14128

97086

Italy

MT

6265

6140

7427

5592

6607

6846

5059

43936

Turkey

MT

3213

3477

1815

1854

1288

2125

3243

17015

United States

MT

1932

1240

1648

1549

1381

1690

2249

11689

China

MT

1541

1548

1439

1429

1368

1441

1580

10346

Thailand

MT

518

538

535

592

436

496

564

3679

Korea South

MT

453

331

392

517

444

536

428

3101

United Arab Emirates

MT

80

376

574

200

39

60

232

1561

Greece

MT

415

166

171

144

313

85

231

1525

Other

MT

852

566

694

566

518

493

542

4231

Japan's Total Wheat Imports (Unit: MT)

Wheat Product

Wheat Equivalent

Wheat

TOTAL

a

b = a x 1.368

c

b + c

World

MY2013/14

176,921

242,028

5,880,596

6,122,624

*MY2013/14 to Date

97,086

132,814

3,204,473

3,337,287

United States

MY2013/14

23,550

32,216

2,935,006

2,967,222

*MY2013/14 to Date

11,689

15,991

1,687,414

1,703,405

*July 2014 – January 2015

Stocks

In the past, Japan held emergency stocks of wheat at a level equivalent to 2.6 months' worth of the amount of food wheat imported annually. However, due to the shortened time necessary to obtain alternative supplies in case of an emergency, the stocks have been reduced to 2.3 months' worth. For JFY2014, the government set the target for stocks at 940,000 MT. Given flat consumption of food wheat, the same amount of government's stocks is expected for JFY2015.