Japan May Sell Rice to Replace Corn in Feed as Government Stockpiles Swell
Japan May Sell Rice to Replace Corn
Tomohiro Ohsumi/Bloomberg
A farmer works in a rice field in Tsuchiura City, Ibaraki Prefecture. Japan, self-sufficient in rice, is saddled with surplus supplies as domestic consumption has been shrinking due to an aging and declining population. Domestic food rice stockpiles,
A farmer works in a rice field in Tsuchiura City, Ibaraki Prefecture. Japan, self-sufficient in rice, is saddled with surplus supplies as domestic consumption has been shrinking due to an aging and declining population. Domestic food rice stockpiles, Photographer: Tomohiro Ohsumi/Bloomberg
Japan, the world’s largest corn buyer, may import less of the grain if it begins selling surplus rice from stockpiles meant for human consumption to local feed makers.
The Ministry of Agriculture, Forestry and Fisheries may supply rice as an alternative to imported feed grains such as corn from state stockpiles, which stood at 980,000 metric tons on June 30, said Masachika Murai, director at the ministry’s rice policy planning division. Rice sales could be as much as 700,000 tons a year, based on demand from Japanese feed mills, he said in an interview in Tokyo yesterday.
Japan, self-sufficient in rice, is saddled with surplus supplies as domestic consumption has been shrinking due to an aging and declining population. Domestic food rice stockpiles, including those held by the private industry, may climb to 3.24 million tons at the end of next June, the highest level since 2003, according to the July 30 report from the ministry.
“The government’s sales of rice for feed may alleviate oversupply, but they are not the solution to the problem,” said Takaki Shigemoto, an analyst at JSC Corp. in Tokyo.
Japanese growers should become price-competitive so that they can sell surplus rice in the international market, as global grain supplies are expected to become tight in the long term on a rising population and the growth of emerging economies, Shigemoto said. Japan protects local farmers from foreign competition with a 778 percent tariff on imports, keeping domestic rice prices far above the global level.
Corn Imports
Japan imported 10.6 million tons of corn for feed use from the U.S. last year, data from the Ministry of Finance show. The purchase from the biggest exporter represented 96 percent of Japan’s total corn imports. Corn futures in Chicago have fallen 2.6 percent this year.
The government holds about 1 million tons of domestic rice in its reserve in case domestic production falls short of demand due to bad weather. The ministry purchases newly harvested grain to replace its sales of older rice from warehouses.
As domestic consumption declined, inventories held by farmers and distributors grew 2.8 percent to 2.18 million tons at the end of June, extending a 32 percent increase in the previous year. The volume is the biggest in eight years, making it difficult for the ministry to sell stockpiled rice in the local food market, Murai said.
Rice Sales
Food rice sales by the government plunged 65 percent to 30,000 tons in June from July last year, ministry data show. In the year ended March 31, the government spent 31.7 billion yen ($369 million) on the reserves, including storage costs. The spending increased 21 percent from the previous year.
The government may stop selling stockpiled Japanese rice for food, as oversupply in the domestic market is expected to continue, Murai said. Japan’s feed industry, which consumes about 12 million tons of imported corn annually, is ready to use more than 1 million tons of rice as an alternative if the price is affordable, he said.
A new system of selling rice stockpiles for feed may start as early as next fiscal year in April if the budget for the plan is approved by ruling parties and the parliament, Murai said.
Separately, the ministry sells about 300,000 tons of imported rice to feed makers annually as Japan agreed to give minimum market access to rice-exporting countries at the Uruguay Round of world trade talks in 1993, buying 770,000 tons a year.
To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net
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