Highlights

As a result of favorable weather conditions, 2016 rice production (including feed rice) is estimated to increase slightly despite reduced planting area. However, rice utilization in compound feed is believed to have reached its ceiling in MY2015/16, and further expansion is expected to be limited due to the price competitiveness of other feed grains (namely corn). Following Japan's record crop in 2015, wheat production is estimated to decrease significantly in 2016 due to unfavorable weather conditions.

Feed Production

As a result of declining livestock inventories, Japanese compound feed production has fallen for the last three years. The Ministry of Agriculture, Forestry and Fisheries (MAFF)'s latest statistics show that cattle and swine inventories further declined in 2016, but noted a small increase in the number of Japanese egg laying hens (layers). As feed for layers accounts for nearly 30 percent of total compound feed production (the largest share), the small increase in layer inventories was enough to offset the gradual decline in other livestock inventories. Accordingly, Japanese compound feed production in MY2015/16 is expected to remain flat. Japan maintains a feed price stabilization program that consists of a combination of a MAFF-issued subsidy and an industry fund to help absorb sudden surges in compound feed prices. The industry fund is activated when the import cost of ingredients, in a particular quarter, exceed the average import cost of ingredients in the previous year. As a result of lower prices for corn, soy meal, and freight, however, no compensation payments have been made since the first quarter of Japan Fiscal Year (JFY, April – March) 2015.

Rice

Rice Production, Supply, and Distribution

Rice, Milled

2014/2015

2015/2016

2016/2017

Market Begin Year

Nov-14

Nov-15

Nov-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

1608

1608

1586

1586

1580

1570

Beginning Stocks

3007

3007

2821

2821

1584

2611

Milled Production

7849

7849

7653

7670

7680

7790

Rough Production

10782

10782

10512

10536

10549

10700

Milling Rate (.9999)

7280

7280

7280

7280

7280

7280

MY Imports

635

635

700

700

700

700

TY Imports

688

688

700

700

700

700

TY Imp. from U.S.

328

320

0

0

0

0

Total Supply

11491

11491

11174

11191

10874

11101

MY Exports

70

70

80

80

85

85

TY Exports

65

65

75

75

80

80

Consumption and Residual

8600

8600

8600

8500

8700

8500

Ending Stocks

2821

2821

2494

2611

2089

2516

Total Distribution

11491

11491

11174

11191

10874

11101

Production

With Japanese table rice consumption decreasing year-on-year, MAFF is subsidizing farmers to shift production from table rice to other crops (such as wheat and soybeans). For those farmers who have not shifted production, as shown in table 4 below, MAFF has had some success in encouraging increased production of rice for feed and whole crop silage (WCS) on paddy field.

As a result of MAFF's push, Japanese feed rice production more than doubled in 2015, to 400,490 MT, partly offsetting the reduction in table rice production. However, Japanese total rice production still decreased 2.3 percent to 7.67 million MT. MAFF has continued the subsidy for feed rice production in 2016, and estimates that the planting area for table rice production has decreased by nearly 25,000 ha in 2016 (when compared to 2015) while the planting area for feed rice has increased by roughly 11,000 ha. Factoring in these planting changes, plus planting area changes for other types of rice (e.g., rice for processing), we anticipate a decrease in the total rice planting area of approximately 15,000 ha (to 1.57 million ha). As a result of favorable weather during the growing period, MAFF estimates that the 2016 rice-crop index is 103 (NOTE: 100 represents an average crop), and that rice yields are above average (at 5.0 MT/ha). As MAFF has incentivized farmers to plant high-yield varieties of feed rice with an incremental subsidy payment for higher yields, the yield for feed rice (5.2 MT/ha) is expected to exceed the yield for ta ble rice. Despite the decreased planting area for rice, the increased yield is forecast to increase total rice production by 120,000 MT to 7.79 million MT in 2016.

Consumption

Per-capita rice consumption dropped one kilogram to 54.6 kilogram in JFY2015, and MAFF estimates that total table rice consumption dropped 160,000 MT to 6.96 million MT in MY2015/16. MAFF forecasts total table rice consumption will further decrease by 30,000 MT to 6.92 million MT in MY2016/17. For feed, about 1.1 million MT of rice1 was used in compound feed production in MY2014/15, increasing rice's utilization ratio from 3.9 percent in MY2013/14 to five percent at the expense of sorghum, corn and wheat. For the first nine months of MY2015/16 (November 2015 - July 2016), the utilization ratio of rice in compound feed increased only 0.1 percent to 5.1 percent, and this slow growth is attributable to competitive prices for corn (whose utilization ratio increased by more than one percent). Accordingly, as feed consumption is not expected to offset the 160,000 MT decrease in table rice consumption, total rice consumption is expected to decrease 100,000 MT to 8.5 million MT in MY2015/16.

Rice for feed use is forecast to remain flat in MY2016/17 as strong corn demand is expected to suppress any increases in feed rice consumption. Consequently, total rice consumption is forecast to remain unchanged at 8.5 million MT in MY2016/17.

Wheat

Wheat Production, Supply, and Distribution (1,000 MT)

Wheat

2014/2015

2015/2016

2016/2017

Market Begin Year

Jul-14

Jul-15

Jul-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

213

213

213

213

213

214

Beginning Stocks

1159

1159

1227

1227

1288

1288

Production

852

852

1004

1004

825

760

MY Imports

5878

5878

5715

5715

5800

5800

TY Imports

5878

5878

5715

5715

5800

5800

TY Imp. from U.S.

2969

3020

0

2531

0

0

Total Supply

7889

7889

7946

7946

7913

7848

MY Exports

262

262

258

258

270

260

TY Exports

262

262

258

258

270

260

Feed and Residual

500

500

500

500

550

500

FSI Consumption

5900

5900

5900

5900

5900

5900

Total Consumption

6400

6400

6400

6400

6450

6450

Ending Stocks

1227

1227

1288

1288

1193

1138

Total Distribution

7889

7889

7946

7946

7913

7848

Production

Following Japan's record crop in 2015, wheat production is estimated to decrease significantly in 2016 due to unfavorable weather conditions. MAFF estimates that the total planting area increased 1,300 ha to 214,400 ha, as some table rice production was shifted to wheat on paddy fields. Despite increases in the planting area, MAFF estimates a three percent decrease in production (in prefectures other than Hokkaido) as high temperatures cut short the grain filling period.

Although MAFF has yet to publicize production data for Hokkaido, where 65 percent of Japan's wheat is produced, heavy rains delayed the harvest and negatively impacted the quality of the grain (reports indicate that the wheat began to germinate during the delayed harvest). Accordingly, yield and production estimates in Hokkaido are expected to be below average. Therefore, factoring in Hokkaido, total Japanese production is estimated to decrease 25 percent to 760,000 MT in 2016.

After the Hokkaido wheat was harvested in early August, a series of typhoons hit in early September and also severely damaged production of potatoes, onions and sugar beets and their fields. As wheat is part of the crop rotation with potatoes and sugar beets, planting of wheat has been delayed and a reduction in the planting areas is forecast in 2017.

Consumption

Given the aging population, Japanese food consumption has been trending down in recent years. Both per-capita caloric intake and per-capita grain consumption have decreased six percent, and rice consumption has decreased by 11.1 percent in the last decade. Contrary to this trend, per-capita wheat consumption increased 4.1 percent in the last decade. Food wheat consumption is expected to remain strong at 5.9 million MT for MY2016/17. Because of low international wheat prices and the strong Japanese yen, MAFF reduced the government's resale price of five major wheat classes between October 2016 and March 2017 by an average of 7.9 percent to 48,470 yen/MT. The average price of hard and semi-hard wheat classes (DNS, 1CW and HRW) fell 6.5 percent to 48,250 yen/MT and the average price for soft wheat (ASW and WW) is reduced 10.4 percent to 48,920 yen/MT. In accordance with declining imported wheat prices, prices of domestic wheat will be lowered, and flour millers are expected to lower flour prices in December. Wheat prices have declined from their highest levels in early 2015, but a decline in price in a relatively short time period is not expected to spur consumption increases (rather, it is expected to put additional pressure on rice consumption).

Wheat is a minor ingredient in compound feed and the quantity used remained relatively flat at approximately 390,000 MT in MY2014/15 and MY2015/16 (with the composition ratio at 1.6 percent).

Sufficient global supplies lowered wheat prices, and Japan's imported feed wheat price dropped 20 percent in MY2015/16 from the previous year. Despite competitive wheat prices, industry contacts report that wheat for feed use is unlikely to increase during this MY unless wheat prices become much lower than other feed ingredients. Post forecasts wheat for feed and residual consumption to remain flat at 500,000 MT in MY2016/17.

Trade

Record domestic wheat production last year suppressed food wheat imports (down four percent in MY2015/16). However, as a result of an anticipated decrease in 2016 domestic production, total wheat imports in MY2016/17 are expected to rebound to 5.8 million MT in order to meet demand.

Barley

Barley Production, Supply, and Distribution (1,000 MT)

Barley

Market Begin Year

2014/2015

2015/2016

2016/2017

Oct-14

Oct-15

Oct-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

60

60

61

61

61

61

Beginning Stocks

393

393

330

330

277

277

Production

170

170

177

177

172

166

MY Imports

1097

1097

1100

1100

1100

1000

TY Imports

1097

1097

1100

1100

1100

1000

TY Imp. from U.S.

71

87

0

0

0

0

Total Supply

1660

1660

1607

1607

1549

1443

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

950

950

950

950

930

930

FSI Consumption

380

380

380

380

380

380

Total Consumption

1330

1330

1330

1330

1310

1310

Ending Stocks

330

330

277

277

239

133

Total Distribution

1660

1660

1607

1607

1549

1443

Production

For 2016, the total planting area for barley remained relatively unchanged, but production estimates are down six percent. MAFF estimates that the planting area of two-row barley increased one percent while production decreased eight percent due to prolonged rain during the planting period, and a shortened grain filling period caused by high temperatures in the main production regions (i.e., Tochigi and Saga Prefectures). The planting area for six-row barley remained unchanged but production increased two percent as a result of favorable weather in the major production region (i.e., Hokuriku). The planting area of naked barley decreased four percent because of a shift of production to wheat, and production decreased 13 percent as prolonged rain from planting to the grain filling period decreased yields in the main production regions (i.e., Ehime and Oita Prefectures).

Consumption

Barley for feed and residual consumption and food, seed & industrial (FSI) consumption are expected to remain unchanged at 950,000 MT and 400,000 MT, respectively, in MY2015/16. For MY2016/17, FSI consumption is forecast to remain flat, but feed and residual consumption is forecast to decline slightly to 930,000 MT due to a projected decline in cattle inventories (more than 90 percent of Japan's feed barley is used for compound feed for cattle).

Sorghum

Sorghum

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct-14

Oct-15

Oct-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

51

51

24

23

54

23

Production

0

0

0

0

0

0

MY Imports

903

902

780

700

730

700

TY Imports

903

902

780

700

730

700

TY Imp. from U.S.

75

113

0

0

0

0

Total Supply

954

953

804

723

784

723

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

930

930

750

700

730

700

FSI Consumption

0

0

0

0

0

0

Total Consumption

930

930

750

700

730

700

Ending Stocks

24

23

54

23

54

23

Total Distribution

954

953

804

723

784

723

Sorghum is wholly consumed as a feed in Japan. The utilization ratio of sorghum in compound feed declined in the first 10 months of MY2015/16 (October 2015 – July 2016) from 3.9 percent to 2.8 percent mainly due increased corn use. Accordingly, consumption is expected to decrease to 700,000 MT in MY2015/16. Given competitive prices for corn and increased domestic production of feed rice, increases in sorghum consumption are not anticipated. Thus, sorghum consumption is forecast to remain unchanged in MY2016/17.

Rye

Rye Production, Supply, and Distribution (1,000 MT)

Rye

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct-14

Oct-15

Oct-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

4

4

3

4

2

2

Production

0

0

0

0

0

0

MY Imports

22

22

15

16

20

16

TY Imports

22

22

15

16

20

16

TY Imp. from U.S.

0

1

0

0

0

0

Total Supply

26

26

18

20

22

18

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

15

14

10

11

13

10

FSI Consumption

8

8

6

7

8

7

Total Consumption

23

22

16

18

21

17

Ending Stocks

3

4

2

2

1

1

Total Distribution

26

26

18

20

22

18

Due to its price relative to other grains, Japanese consumption of rye continues to decline, and the utilization ratio of rye in compound feed fell below 0.1 percent in the first 10 months of MY2015/16. Rye for feed consumption is expected to fall below 11,000 MT in MY2015/16. As feed rye is exclusively used for cattle feed, and cattle inventories are anticipated to fall slightly, rye for feed consumption is forecast to decline to 10,000 MT in MY2016/17.

Corn

Corn Production, Supply, and Distribution (1,000 MT)

Market Begin Year

Oct-14

Oct-15

Oct-16

Japan

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

1

1

1

1

1

1

Beginning Stocks

1290

1290

1348

1346

1249

1247

Production

1

1

1

1

1

1

MY Imports

14657

14655

15000

15000

15000

15000

TY Imports

14657

14655

15000

15000

15000

15000

TY Imp. from U.S.

11911

126639

0

0

0

0

Total Supply

15948

15946

16349

16347

16250

16248

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

11000

11000

11500

11500

11500

11500

FSI Consumption

3600

3600

3600

3600

3600

3600

Total Consumption

14600

14600

15100

15100

15100

15100

Ending Stocks

1348

1346

1249

1247

1150

1148

Total Distribution

15948

15946

16349

16347

16250

16248