Abe Boosting Rice Output Means Deeper Slump in Corn Imports

Prime Minister Shinzo Abe’s drive to double farm income and expand Japan’s feed-rice output eightfold over the next decade may accelerate a decline in corn imports, according to the farm ministry.

“Demand for rice as a corn substitute is potentially huge,” said Tsuyoshi Yoshida, assistant director at the grain division of the Ministry of Agriculture, Forestry and Fisheries. The ministry will consider increasing subsidies to growers of rice for animal feed, Yoshida said in an interview on July 17, after the ruling Liberal Democratic Party set an annual output target of as much as 1.5 million metric tons by 2023. Output was 183,400 tons last year and as little as 9,500 tons in 2008.

Corn imports by Japan, the world’s biggest buyer, fell for the last seven years as prices in Chicago surged as much as fourfold since 2006. The yen’s depreciation since Abe became leader in December is increasing costs for feed makers in the third-largest economy, which imports almost all its corn.

The government pays 80,000 yen ($800) annually to farmers for the equivalent of every 1,000 square meters of land they cultivate with feed rice under a supply agreement with feed makers. Any increase in the payment would be the first since 2010, Yoshida said.

Abe’s Liberal Democratic Party and its coalition partner won a majority of upper house seats in the weekend vote, boosting his ability to carry out a plan of monetary easing, fiscal stimulus and deregulation known as Abenomics.

Corn for delivery in December fell 0.8 percent to $4.9675 a bushel on the Chicago Board of Trade at 11:34 a.m. Tokyo time. Futures plunged 29 percent this year after gaining for the past four years and touching a record $8.49 last year.

Corn Imports

Japan’s corn imports fell 7.3 percent to 6.03 million tons in the first five months of 2013, farm ministry data show, after tumbling to 14.9 million tons in 2012, the least since 1986.

Inbound shipments may shrink by about 400,000 tons this year as higher prices weaken demand, said Nobuyuki Chino, the president of Tokyo-based Continental Rice Corp., who has traded grains for more than three decades.

Brazil may become Japan’s largest corn supplier for the first time this year, as the South American nation starts to beat U.S. producers on price, Chino said on July 12.

Shipments from Brazil reached 2.76 million tons in the five months through May 31, surpassing 2.52 million tons from the U.S., farm ministry data show. Argentina was the third-largest supplier with 338,541 tons.

About 10 million tons of the grain imported in 2012 was for feed use and Japanese rice could eventually displace 70 percent of this, Yasuhiro Ozato, the head of the Liberal Democratic Party’s farm policy committee, said on July 12.

Higher Yields

The government wants to help researchers develop higher-yielding rice to double output and halve costs, Ozato said.

Boosting farmers’ incomes may help Abe win their support as he seeks Japan’s entry into the Trans-Pacific Partnership free-trade agreement with nations including the U.S. and Australia, the biggest suppliers of pork and beef to Japan.

Japan’s combined annual farm income halved to 3.2 trillion yen over the past two decades as domestic output shrank and food prices fell, according to the Norinchukin Research Institute, a Tokyo-based affiliate of the bank that serves the nation’s agricultural, fishing and forestry cooperatives.

“The ruling party is trying to alleviate farmers’ concern that the trade agreement would boost shipments of cheap meat and dairy products, dealing a blow to local livestock producers,” said Takaki Shigemoto, an analyst at research company JSC Corp. in Tokyo.

Japan will join talks for the TPP July 23. Abe may sacrifice barriers protecting Japan’s beef, pork and dairy products to maintain tariffs on rice and sugar, said Masayoshi Honma, a professor of agricultural economics at the University of Tokyo, who advised Abe during his first term as prime minister in 2007. The nation doesn’t impose duties on feed corn.

“The LDP has promised a lot to farmers,” said Tetsuro Shimizu, general manager at Norinchukin Research Institute. “I wonder how feasible these promises are because the government is struggling with a swelling fiscal deficit.”

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