PS&D

Rice, Milled

2013/2014

2014/2015

2015/2016

Market Begin Year

Nov 2013

Nov 2014

Nov 2015

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

1,599

1,599

1,575

1,575

0

1,605

Beginning Stocks

2,742

2,744

2,778

3,119

0

3,327

Milled Production

7,832

7,676

7,679

7,583

0

7,500

Rough Production

10,758

10,758

10,548

10,548

0

10,302

Milling Rate (.9999)

7,280

7,280

7,280

7,280

0

7,280

MY Imports

654

656

700

700

0

700

TY Imports

650

669

700

700

0

700

TY Imp. from U.S.

0

303

0

0

0

Total Supply

11,228

11,076

11,157

11,402

0

11,527

MY Exports

200

57

200

75

0

75

TY Exports

200

63

200

75

0

75

Consumption and Residual

8,250

7,900

8,200

8,000

0

8,000

Ending Stocks

2,778

3,119

2,757

3,327

0

3,452

Total Distribution

11,228

11,076

11,157

11,402

0

11,527

Yield (Rough)

6.7280

6.7280

6.6971

6.6971

0.0000

6.4187

TS=TD

0

0

0

0

0

0

Production down 2.0 Percent

Although production volumes vary, paddy rice is produced in every prefecture in Japan. In contrast, upland rice is only produced in the Kanto region of Japan, centering on Ibaraki Prefecture, as part of a regular crop rotation. Upland rice used to be produced nationwide, but due to chronic oversupply of table rice, the planted area of upland rice has diminished significantly, and total area is now only one-tenth of what it was 50 years ago.

For the last two years, rice stocks have been at their highest level since 2002, resulting in low wholesale prices for domestic rice. This, combined with the government's decision to halve the subsidy payment for table rice producers, discouraged planting in 2014, resulting in a 1.5 percent decrease in planted area. Due to a slight decline from the excellent yield for paddy rice in 2014 and the aforementioned decrease in planted area, overall rice production decreased slightly from 2013, to 7.7 million MT. The weak price is expected to continue as a result of persistent high stock levels, further discouraging planting in 2015.

Encouraging feed rice production is one of the major policy measures in the Basic Plan for Food, Agriculture and Rural Areas, which is due to be revised in March 2015 and sets the policy direction for the next ten years.

Total rice production (food and feed) was approximately 7.58 million MT in 2014. For 2015, as feed rice production is expected to increase, mostly offsetting a slight decrease in table rice production, Post forecasts total rice production to decrease marginally, to 7.53 million MT.

Table Rice Consumption Remains Sluggish, but Rice in Feed is Expected to Increase

Per capita consumption of rice in Japan has been steadily declining since its peak in 1962, and is now half of what it was 50 years ago. MAFF attributes a slight increase in per capita consumption in 2013 to a last minute rise in demand before the consumption tax hike in April 2014. However, the Japanese population is both declining overall and aging rapidly. Assuming that per capita rice consumption will continue its downward trend, demand for table rice is expected to decline at an increasing rate in the coming years. MAFF forecasts the aggregate table rice demand to be 7.78 million MT for 2014/15 and 7.7 million MT for 2015/16.

MAFF incentivizes the conversion from production of rice for food use to the production of rice for other uses, particularly feed. In 2014, feed rice production increased 63,000 MT from 2013, to 178,000 MT (brown basis). The GOJ also sells imported rice out of Ordinary Minimum Access (OMA) rice stocks to feed manufacturers at a discount. As a result, the utilization ratio of rice in compound feed gradually increased, with the quantity used for feed in the first eight months of JFY2014 (April - November 2014) exceeding that of the entire JFY2013. For JFY2015, the Japan Agricultural Cooperatives' group (JA) has announced that it plans to use 600,000 MT of feed rice (including domestic, OMA and government reserves). Meanwhile, the Feed Manufacturers Association announced that they could use 408,000 MT of domestic feed rice in their compound feed manufacture if rice is available at the same price as imported corn. If both of these targets were realized, that would indicate an increase of one million MT in the use of feed rice. However, sources indicate that it is unlikely that the poultry and swine industries could utilize such a significant increase in the amount of feed rice. In addition, the use of rice in feed imposes a significant fiscal burden on the government, as the difference in producers' income (between table rice and feed rice) is subsidized, and OMA rice is sold for feed use at a price similar to that of imported corn, which is typically less than half the purchased price of OMA rice. The Ministry of Finance has questioned the fiscal justification for indefinitely subsidizing feed rice production. However, in the near term, Post estimates that an increase in rice used in feed will offset the decrease in table rice consumption, and thus overall rice consumption is expected to stay flat in MY 2014/15 and MY2015/16, at approximately eight million MT.

Annual Per Capita Consumption of Rice in Japan (Kilograms, Japan Fiscal Year)

1962

1965

1975

1985

1995

2005

2010

2011

2012

*2013

**2014

**2015

118.3

111.7

88.0

74.6

67.8

61.4

59.5

57.8

56.3

56.9

56.3

56.1

Source: MAFF

*Preliminary

**FAS/Tokyo estimate

Rice Production by Use (1,000 tons; brown basis)

Crop

Total

Table Rice

Non-Table Rice Total

Processing

Government Reserve

Rice Flour

Feed

Exports

*Sake

**Other

2008

8,819

8,658

161

149

Included in table rice

1

8

0

3

2009

8,491

8,309

182

141

13

23

1

3

2010

8,567

8,239

328

213

28

81

2

4

2011

8,584

8,133

451

155

68

40

183

2

4

2012

8,700

8,210

490

181

85

35

183

3

4

2013

8,715

8,181

534

208

183

21

115

3

3

2014

8,614

7,885

729

268

250

18

178

6

4

3

Source: MAFF

*Prior to 2014, even though rice for sake is produced outside the production control program for table rice, it was included in the Table Rice statistics.

**Other includes for rice straw, early harvest rice for forage, and for ethanol production.

Wholesale Price of 2014 Crop Starts 16 Percent below 2013 Level

With another abundant harvest in 2014 and continuing high stock levels, the starting price of the 2014 crop dropped more than 16 percent compared to the same period the previous year. To stop the wholesale price from falling further, in December 2014, the Rice Stable Supply Support Organization, a private group consisting of producers and wholesalers, decided to pay the storage costs for 200,000 MT of table rice, keeping it off the market until the price recovers.

Low Domestic Rice Price Contributes to a Decrease in SBS Rice Imports in JFY2014

As a result of the Government of Japan's (GOJ) tariffication of rice in JFY2000, the Minimum Access commitment was reduced from 8.0 percent to 7.2 percent of total domestic consumption, i.e., from 758,000 MT to 682,000 MT (milled basis), as shown below.

Japan's Minimum Market Access Obligations for Rice (Unit: MT)

Without Tariffication

With Tariffication

Volume

Percent of Domestic Consumption

Volume

Percent of Domestic Consumption

758,000

8.0 %

682,000

7.2 %

Source: MAFF

As of March 3, 2015, eight Simultaneous Buy and Sell (SBS) tenders and thirteen Ordinary Minimum Access (OMA) tenders had been held in JFY2014. While SBS rice goes to retailers and foodservice users and is consumed as table rice, OMA rice does not enter the table rice market. The low price of domestic rice in 2014 led Japan's food service industry to shift to domestic rice. As a result, only 11,506 MT of rice was contracted in the eight SBS tenders. The volume of U.S. rice contracted under the SBS tenders decreased from 20,046 MT in JFY2013 to 3,804 MT in JFY2014 (as of March 3, 2015), of which 64 percent was glutinous rice due to its price competitiveness over domestic glutinous rice.

In recent years, 10,000 ~ 100,000 MT of OMA rice was sold to the food service industry for table rice; between 150,000 and 210,000 MT was used by food processors for miso, shochu (spirits distilled from rice), rice crackers and sweets; between 250,000 and 450,000 tons was consumed by feed millers; and between 40,000 and 200,000 tons were re-exported under food aid programs.

Stocks

Due to a good 2013 crop and sluggish consumption, MAFF had forecast that, by June 2014, privately-held stocks of table rice would increase 14 percent over the previous year, to 2.55 million MT (brown basis). Therefore, the Rice Stable Supply Support Organization purchased 350,000 MT in April 2014 to sell for feed or processing, and the June 2014 stock level instead remained constant at 2.2 million MT. However, that level was still higher than what MAFF considered to be the appropriate private stock level of 1.99 million MT. As MAFF forecasts aggregate table rice demand for 2014/15 to be 7.78 million MT, the 2014 harvest of 7.88 million MT of table rice is expected to add approximately 100,000 MT to privately-held stocks – to 2.3 million MT – by June 2015. However, if MAFF succeeds in convincing farmers to switch production from table rice to feed rice, private stocks could end up closer to the desired 1.99 million MT in 2015 and 2016.

MAFF holds emergency stocks of rice, the level of which is targeted at 1 million MT (brown basis, excluding OMA rice). The 2011 Great East Japan Earthquake triggered an effort to renew government stocks of rice, leading to an increase in stocks of domestic rice in 2012. MAFF also holds unsold OMA rice stocks. Since its peak in 2006, the stock level of OMA rice has decreased as MAFF has been aggressively selling OMA rice into the feed sector.

Japan's Government Rice Reserve (Unit: MT, brown rice basis, as of June each year)

Domestic

OMA rice

Total

2006

770,000

1,890,000

2,660,000

2007

770,000

1,520,000

2,290,000

2008

990,000

970,000

1,960,000

2009

860,000

950,000

1,810,000

2010

980,000

880,000

1,860,000

2011

880,000

960,000

1,840,000

2012

950,000

780,000

1,730,000

2013

910,000

800,000

1,710,000

2014

910,000

840,000

1,750,000