Wheat prices in Japan are set to decline from the highest level since 2009 amid a global rout in commodities, according to the a millers’ group in the world’s second-largest importer of the grain.
Wheat imported by the Japanese government for sale to flour millers may drop more than 7 percent in the six months from October from an average of 60,070 yen ($485) a metric ton in the current six-month period, according to the country’s Flour Millers Association.
Futures have lost 14 percent this year in Chicago. A slowdown in China’s economy that weakened demand from the world’s largest consumer of commodities also depressed ocean freight rates, leading to lower costs for Japanese grain imports, said Charlie Utsunomiya, director at the Tokyo office of U.S. Wheat Associates, an export-promotion group.
“Manufacturers are losing reasons to raise food prices before they complete passing on raw-material costs inflated by a weaker yen,” Naohiro Niimura, partner at Market Risk Advisory, a researcher in Tokyo, said in an interview July 24.
The Bloomberg Commodity Index fell to the lowest since 2002 on Monday and has lost 29 percent in the past year. Gold sank to the weakest in more than five years last week amid a stronger dollar, while industrial metals tumbled amid concerns China’s demand is faltering.
The wheat price reduction would save the milling industry almost 25 billion yen a year, said Masaaki Kadota, an executive director at the group. The move could also pressure ramen noodle and bread makers including Nisshin Seifun Group Inc. and Yamazaki Baking Co. to cut prices.
Yamazaki Baking, Japan’s biggest bread maker with a 36 percent share of the market, has rallied 34 percent this year, outpacing a 16 percent gain in the benchmark Topix index, as investors looked to domestic food companies as a defensive play against China and Europe slowing.
Yamazaki Baking raised some product prices by 2.6 percent on average on July 1, the first increase in two years. A large change in raw-material costs will be reflected in the prices of the company’s products, said spokesman Takashi Nishio.
A Nisshin spokeswoman said the company can’t comment on wheat prices before the government announces any change.
The government will adjust wheat prices based on purchasing costs in the six months through September, said Koichi Okamoto, the head of the grain pricing division at the Ministry of Agriculture, Forestry and Fisheries.
Japan imports almost 90 percent of its wheat, sourcing 55 percent from the U.S. in the last fiscal year. Overseas purchases and domestic sales are controlled by the agriculture ministry, which reviews the selling price to flour millers every six months.
The cost of importing wheat in the four months through June declined 10 percent from the previous pricing period, according to data from the ministry. In April 2012, the government cut prices by 15 percent to an average 48,780 yen a ton.
The decline comes even after the Japanese currency slid to a 13-year low against the dollar in June and as wheat in Chicago retreated from a six-month high amid ample supply. Wheat for September delivery on the Chicago Board of Trade rose 0.5 percent to $5.04 3/4 a bushel at 2:36 p.m. in Tokyo.