Government Delays Wheat Import Tenders as State Stockpiling System Ends

Japan, Asia’s biggest wheat buyer, is delaying import tenders until local flour millers decide how much they will buy under the system that will replace state stockpiling on Oct. 1.

The Ministry of Agriculture, Forestry and Fisheries, which tenders almost every week to purchase milling wheat from the U.S., Canada and Australia, skipped buying so far this month because end-users are cautious about setting their requirements under the new system, Shirara Shiokawa, director at the ministry’s grain trade division, said in an interview.

The government, which controls overseas purchases and domestic sales to stabilize supply, will end the state stockpiling system, which holds 1.8 months of demand. Millers will have to boost grain inventories to at least 2.3 months, or about 70 days, in reserves from 15 days previously.

The delay in Japanese purchases comes as global wheat prices have surged 23 percent this month, sapping the appetite of other Asian buyers, said Nobuyuki Chino, president of Unipac Grain Ltd. in Tokyo. “A rally in wheat surprised end-users as the market tends to decline in July under harvest pressure from the U.S.,” Chino said by phone today. “They may wait for better prices to come,” potentially curbing prices, he said.

September-delivery wheat declined 0.4 percent to $5.94 a bushel on the Chicago Board of Trade at 5:32 p.m. Tokyo time. It advanced yesterday to the highest since Nov. 23, 2008, on speculation that a prolonged dry spell will widen crop damage in Russia, the fourth-largest exporter.

Next Tender

In the next regular tender, the ministry will buy cargoes for shipment in September, which are expected to arrive in Japanese ports in October, Shiokawa said. The date of the next tender hasn’t been set, he said.

“It takes time for us to adjust to the new method,” Shiokawa said in Tokyo yesterday. The ministry will set wheat- purchasing plans based on hearings with 96 millers across the nation about their monthly demand, he said.

The ministry has so far bought 1.29 million metric tons of milling wheat through regular tenders for shipment by Aug. 10 this fiscal year. It purchased 4.26 million tons in the year ended March 31, 2010.

Japan, which imports almost 90 percent of its wheat, hasn’t changed its March 30 forecast that it will boost imports by 3.3 percent to 4.96 million tons this fiscal year, Shiokawa said. This would be the largest volume in four years as domestic production was cut by wet weather last year.

State Trading

The state trading system was designed to ensure supplies for consumers and protect domestic growers from competition from overseas shippers.

The government may ease control over imports by raising the volume it buys under the so-called simultaneous buy and sell system, or SBS, creating opportunities for exporters such as Russia and France to sell to Japan.

About 7.7 percent of food wheat imports last fiscal year were through the SBS system, which started in April 2007 and allows purchases from any country. Food makers and trading companies jointly bid for grain under the system, which was introduced to loosen the government’s grip on imports.

The agriculture ministry plans to hold regular tenders three times a month and a SBS tender once a month under the new stockpiling system, Shiokawa said.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net

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