Highlights

Reflecting an abundant global supply, prices of imported feed corn fell below 200 USD/metric ton (MT) in March 2016 for the first time since January 2007. Feed millers took advantage of low prices, increasing corn imports five percent in the first seven months of marketing year (MY) 2015/16 compared to the previous year. Post forecasts total corn imports to reach 15 million MT in MY2015/16. The utilization of sorghum in compound feed has dropped below three percent, the lowest on record, largely due to the increased utilization of rice and corn. Post forecasts consumption and imports of sorghum to decline to 750,000 MT and 780,000 MT respectively in MY2015/16.

Feed production

Consistent with the declining and aging Japanese population, overall food consumption had been trending down, and thus the livestock numbers and feed production had gradually declined in recent years. However, compound feed production for the first half of marketing year (MY) 2015/16 (October 2015 – March 2016) increased one percent from the same period last year due to a recovery in swine numbers following the outbreak of Porcine Epidemic Diarrhea (PED) virus in 2014 and a slight, estimated increase in poultry population thanks to strong demand for poultry meat, Compound feed production in MY2015/16 is expected to remain at least the same level as the previous year. The utilization of rice for the composition of compound feed has continuously been over five percent between October 2015 and March 2016. The utilization of corn has increased to 46 percent from 45 percent in MY2014/15, while the ratio of sorghum has dropped below three percent - the lowest on record.

Japan maintains a feed price stabilization program that consists of a combination of a Ministry of Agriculture, Forests and Fisheries (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. No compensation payments were made throughout Japan Fiscal Year (JFY, April – March) 2015, reflecting lower prices of corn, soy meal and freight.

Corn

Corn

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct 2014

Oct 2015

Oct 2016

Japan

USDA Official

New Post

USDA Official

Brazil

USDA Official

New Post

Area Harvested

44

44

39

39

42

42

Beginning Stocks

151

151

152

152

132

139

Production

179

179

153

160

165

173

MY Imports

261

261

223

233

240

252

TY Imports

6870

6870

6870

6870

6870

6870

TY Imp. from U.S.

688

688

700

700

750

750

Total Supply

708

708

700

700

750

750

MY Exports

613

613

0

560

0

600

TY Exports

1018

1018

1005

1012

1047

1062

Feed and Residual

2

2

3

3

2

2

FSI Consumption

2

2

5

5

2

2

Total Consumption

864

864

870

870

880

880

Ending Stocks

152

152

132

139

165

180

Total Distribution

1018

1018

1005

1012

1047

1062

Reflecting an abundant global supply, prices of imported feed corn have gradually declined and fell below 200 USD/metric ton (MT) in March 2016 for the first time since January 2007. Feed millers took advantage of low prices, raising total corn imports five percent in the first seven months of MY2015/16 (October 2015 – April 2016) compared to the same period in the previous year, and corn utilization in compound feed has increased to 46 percent. If the price of corn remains attractive, robust demand for feed corn is expected to continue and raise feed corn consumption to 11.5 million MT in MY2015/16. As there is no sign of significant changes in food, seed and industrial (FSI) consumption (3.6 million MT in MY2015/16), total corn imports are expected to reach approximately 15 million MT in MY2015/16. For MY2016/17, feed consumption is forecast to stay flat if the corn price stays at the current level, and FSI consumption is also forecast to remain unchanged.

Feed Grain Contingency Reserve Program

As Japan relies almost entirely on imported grains for manufacturing feed, the government of Japan (GOJ) operates its regular contingency plan to hold imported corn and sorghum in reserve. In JFY2015, Japan held a total of 1.25 million MT of feed grain in reserve; 600,000 MT by the GOJ and 650,000MT by the private sector. Beginning in JFY2016, the GOJ no longer hold reserves but the private sector holds 850,000 MT of feed grain, and the GOJ subsidizes the storage costs for 5/17 of the 850,000 MT (250,000 MT). In addition to corn and sorghum, the feed grain reserve program was expanded to include barley, wheat, bran, and soybean oil meal. However, industry sources say that corn continues to account for the majority of the reserve. Accordingly, stocks are expected to gradually reduce from 1.35 million MT in MY2014/15 to 1.25 million MT in MY2015/16 and to one million MT in MY 2016/17, and will likely offset the need for some imports over the next few years. Post forecasts a slight decline in total corn imports from 15 million MT in MY2015/16 to 14.9 million MT in MY2016/17.

Sorghum

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct 2014

Oct 2015

Oct 2016

Japan

USDA Official

New Post

USDA Official

Brazil

USDA Official

New Post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

51

51

24

23

24

53

Production

0

0

0

0

0

0

MY Imports

903

902

800

780

850

730

TY Imports

903

902

850

780

850

730

TY Imp. from U.S.

75

113

0

0

0

0

Total Supply

954

953

824

803

874

783

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

930

930

800

750

850

730

FSI Consumption

0

0

0

0

0

0

Total Consumption

930

930

800

750

850

730

Ending Stocks

24

23

24

53

24

53

Total Distribution

954

953

824

803

874

730

Almost all sorghum is used for feed, of which over 90 percent is consumed by the swine and poultry sectors. The utilization ratio of sorghum in compound feed fell below three percent in recent months, the lowest level on record due mainly to an increase in the utilization of rice and corn. As a result, the quantity of sorghum used in compound feed dropped 30 percent in the first half of MY2015/16, and imports also fell 30 percent. Accordingly, consumption and imports of sorghum are expected to decline to 750,000 MT and 780,000 MT respectively in MY2015/16. With an anticipated increase of rice used in compound feed, consumption and imports of sorghum are forecast to further decrease in MY2016/17.