Wheat Prices in Japan May Fall Most Since 2009, Cutting Retail Food Costs

Wheat prices in Japan, Asia’s second- largest importer, may decline in April by the most since October 2009, putting food makers including Yamazaki Baking Co. and Nisshin Seifun Group Inc. under pressure to cut prices.

The price of wheat imported by the government for sale to flour millers may drop about 10 percent from 57,720 yen ($748) a metric ton on average, according to SMBC Nikko Securities Inc. That would help the milling industry save almost 29 billion yen in costs a year, Japan’s Flour Millers Association estimates.

The reduction, the first in two years, may increase deflationary pressure after consumer prices in Japan declined for a third straight year in 2011. Lower food costs could boost personal spending, which has shown signs of reviving amid a deepening export slump.

“A drop in the grain costs will increase price-cutting requests to food makers from retailers,” Yoshiyasu Okihira, senior analyst at SMBC Nikko Securities in Tokyo, said in an interview. “Bread makers will have no other options but to lower prices, probably around July.”

The government will decide whether to adjust wheat prices in late February based on purchasing costs in the previous six months, said Hiromi Iwahama, director for grain trade and operation at the Ministry of Agriculture, Forestry and Fisheries.

Iwahama declined to comment further on possible changes ahead of the announcement. Masaaki Kadota, executive director at the Tokyo-based flour millers association, said a 10 percent cut is likely.

Costs of importing wheat in the five months ended Jan. 31 declined about 15 percent from the previous pricing period, according to ministry data. The expected drop would be the largest since October 2009, when the government slashed prices by 23 percent to 49,820 yen a ton on average.

Yen Rally

The decline came after the Japanese currency rallied to a postwar record against the dollar. Wheat in Chicago retreated after reaching a 29-month high in February 2011, as high prices spurred more planting and boosted a global glut.

Wheat futures lost 17.8 percent last year on the Chicago Board of Trade, the biggest decline since 2008. The price reached a record $13.495 a bushel in February 2008. The March- delivery contract was at $6.6575 a bushel at 4:42 p.m. Tokyo time.

Japan imports almost 90 percent of its wheat and sourced about 60 percent of the grain last fiscal year from the U.S., the biggest exporter. Overseas purchases and domestic sales are controlled by the agriculture ministry, which reviews the selling price to flour millers every six months.

Increased Buying

Millers may accelerate wheat purchases in coming months, taking advantage of a cut in the government-set prices, as cold weather in Europe boosts speculation the price may increase in October, said Charlie Utsunomiya, director at the Tokyo office of U.S. Wheat Associates.

Last year, the government raised the wheat price by 2 percent in October after boosting it by 18 percent in April, the most in three years. Yamazaki Baking Co., the largest bread maker in Japan, raised its prices by about 6 percent on average in July, the first gain since 2008. Media relations executives at Yamazaki and Nisshin declined to comment or be identified when contacted by Bloomberg News, citing company policy.

Japan paid 27,103 yen a ton on average for 474,705 tons of milling wheat from the U.S., Canada and Australia in January, the ministry data show. The price, dropping from 27,255 yen in December, was 28 percent less than a year ago.

World food prices tracked by the United NationsFood and Agriculture Organization reached the highest ever in February 2011 on surging grain prices, before slipping 11 percent through December.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net Yasumasa Song in Tokyo at ysong9@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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