Japan will introduce a new Simultaneous Buy-and-Sell (SBS) import category in October of this year covering all wheat classes. Japan’s Ministry of Agriculture, Forestry and Fisheries’ (MAFF’s) intent is reportedly to expand flexibilities for Japanese flour millers to purchase diversified classes and specifications of wheat at competitive prices. Up to 200,000 MT per year of wheat can be imported in either bulk or containerized shipments under the new Category III (but imports under Category III are not obligatory if the general import system or another SBS category can be utilized).

General Information:

Japanese Wheat Import System

1. General Import of Food Wheat (General Import System)

MAFF currently purchases major classes of food wheat, such as Western White (WW), Dark Northern Spring (DNS) and Hard Red Winter (HRW), from the United States, as well as Canadian Western Red Spring (1CW), and Australia Standard White (ASW), and channels their imports to select importers through a tendering system. On the 20th of each month, Japanese flour millers submit purchase applications for a specific quantity, by class, four months ahead of the preferred arrival date in Japan. MAFF then determines the quantity-by-class and origin of the wheat for purchase each month, and sets a planned purchase price by origin, grade, class, quantity and type of import (bulk or container), taking into account international prices, freight, and the exchange rate.

MAFF invites MAFF-licensed importers to participate in competitive tenders three times a month (the first, second and third week of a month) and awards those who offer a price lower than MAFF’s planned purchase price (from the lowest price up, until the quantity is fulfilled). Any wheat classes, excluding Durum and Prime Hard, can be imported under this system (but only if a purchase application reaches a level to fulfill the bulk shipment). MAFF, in turn, sells purchased wheat to domestic flour millers with a mark-up plus port and inspection charges. The mark-up is currently 17 yen/kg (45.2 yen/kg is the ceiling), which is used to subsidize domestic wheat production.

To ensure domestic prices better reflect international prices, MAFF revises the re-sale price of imported wheat twice a year (issuing a price for the period April – September and a price for the period October – March). Prior to the arrival of a shipment in Japan, MAFF and a flour miller jointly conclude a buy-and-sell contract. Therefore, after the arrival and inspection of a shipment, the flour miller immediately purchases the contracted volume.

2. Simultaneous Buy-and-Sell (SBS) Imports of Food Wheat

MAFF operates SBS tenders to allow imports of food wheat in bulk shipments (a Category I Import) and container shipments (a Category II Import). Durum of any origin, Australian Prime Hard, Australian Premium White, and Australian Hard (for food use) can be imported under Category I, and any other wheat classes other than the five major wheat classes (WW, DNS, HRW, 1CW and ASW) can be imported under Category II.

MAFF-licensed importers and purchasers jointly bid to import and purchase a particular class of wheat. Like the General Import System described above, MAFF sets a planned purchase price by origin, grade, class, quantity and type of import (bulk or container), taking into account international prices, freight, and the exchange rate. However, for SBS imports, MAFF also considers the planned sales price by origin, grade, class and type of imports (bulk or container), and adds a mark-up plus port and inspection charges. Because there is no quota set for Category I or II, MAFF awards those bidders whose offer is lower than MAFF’s purchase price and higher than MAFF’s sales price.

3. Modification to the SBS Import System

Building on the Agricultural Competitiveness Enhancement Program, MAFF has announced it intends to establish a “Category III” under the SBS system this October, under which all wheat classes of all origins, including the five major classes (WW, DNS, HRW, 1CW and ASW), can be imported. The operation of Category III is summarized below:

1) Commencement of Tender October 2017

2) Annual Quota 200,000 MT

3) Setting a Mark-up

MAFF will set a single mark-up which applies to all wheat imported under Category III.

4) Selection of Successful Bidders

MAFF intends to award those who offer the largest gap between MAFF’s import purchase price and its planned sales price (until the quantity is fulfilled).

4.SBS Imports of Feed Wheat

All feed wheat (save for Australian) is imported in bulk shipments under the SBS import system operated by MAFF. MAFF sets import quotas for feed wheat for each Japanese fiscal year (for JFY2016 the total was 600,000 MT for feed wheat). MAFF-licensed importers and purchasers (feed millers, feed millers associations, agricultural cooperatives, et. al.) collaboratively bid for imports and purchases. MAFF sets a planned purchase (by variety), by taking into account the international price, freight, the exchange rate, the planned sales price (by variety), a mark-up, and port and inspection charges.