June 06, 2008

 

Market conditions driving Japan to boost domestic soy production 

 
 

An expected drop in US soy production, consumer food scares, high prices and a fear of GM-foodstuff is  prompting Japan to look at raising production at home to meet its soy needs, according to  a USDA GAIN report released May 15, 2008.

 

Japan's domestic soy production can only supply 5 percent of local demand which is mostly non-GM based.  

 

The country imported 4.24 million  tonnes of soy last year and the same amount is expected in 2008. Of this, the US would account for 80 percent, with the rest supplied by Brazil and Canada.

 

However, the proportion of non-GM soy has been dwindling in the US and the rest of the major soy producing countries. 

 

At the same time prices are rising. The CIF import price of soy in CY2007 jumped to US$400/tonne. The price continued to increase throughout the year and reached US$495/tonne in December 2007, and as high as US$629/tonne in March 2008. 

 

The higher prices are apparent: while Japan's soymeal use in 2007 had only increased 4 percent from 2006, values rose 24 percent.

 

Recent price hikes have caused strong concern among the Japanese industry and government over future soy availability.

 

At the same time, Japanese retailers believe that they must remain with non-GM sources as they say GM soy are not well accepted yet in Japanese market, except in food oil

 

Besides looking at expanded production at home, the country is now looking for non-GM soy from countries like Australia and others in South America.

 

Its efforts at home to boost production may prove to be an uphill task, given that yields and quality have traditionally been low and costs are prohibitively high.

 

The fresh interest in raising domestic production comes as commodity prices remain high and US soy production  is expected to range lower this year. 

 

The call to increase domestic farm production also reached a fever pitch after a food poisoning incident in imported processed products.   MAFF and other authorities are using this opportunity to promote domestic agriculture, including livestock farming. 

 

However, the report said Japan is unlikely to see any increases given limitations to its workforce and other factors.

 

Government tries to boost soy production 
 

Japan's Ministry of Agriculture, Forestry and Fisheries (MAFF) has launched the programme 'Soybean 300A' in 2002 and has been aiming to achieve a stable yield of 3 tonnes /ha in Japan.  The programme focuses on seeding and non-tillage technology suitable for the Japanese climate and geography.  However, the difference between the goal and the current status is significant, the report said.

 

Although the country's has set a target of raising production to 270,000 tonnes by 2015 ( to meet 6 percent of demand), it has not fulfilled its targets since 2002. 

 

Still, the ministry is making efforts to push for increased yields. The country recently started a soy genome project, in which scientists aim to find ways to increase yields by using genome information.  Japan's government has commited US$4 million annually for five years to this project.

 

Rapeseed suppliers shrinking
 

Japan is also seeing an increased reliance on Canada, its main rapeseed supplier. Canada increased its dominant position as a rapeseed supplier to Japan, providing 83 percent in CY2007. Australia reduced its rapeseed supply for Japan as a result of a severe drought in 2007.  Canada and Australia are the only suppliers and the report expects little change for 2008.

 
Soymeal supply dwindling due to fewer crushers
 

Japan's supply of domestic soymeal is also likely to be curtailed as the number of crushing plants have been steadily declining due to lack of profitability. As of December 2005, the latest year in which figures were available, the country had 41 crushing plants, compared to 117 in 1990. 

 

Soy and rapeseed meals are the primary protein ingredients used in compound feed production in Japan.  About 87 percent of soybean meal is used for feed production, and the remainder is used for consumer foods.

 

Disappearance of China as soymeal supplier
 

One other challenge that Japan faces is the disappearance of China as a soymeal supplier.

 

In the early 2000s, soymeal imports from China almost doubled to a level of 500,000 tonnes  to 600,000 tons because of China's increased crushing capacity. China also offered various advantages such as shorter transportation time, lower prices, and the ability to purchase smaller lots, which allow for direct shipments to local ports in Japan. 

 

However, higher prices from China has prompted Japan to turn to India, which has become its chief supplier.

 

Since CY2006, India has exported 626,144 tonnes worth US$189 million to Japan. This meant  US$301.84 per tonne.

 

China exported 565,251 tonnes at US$179 million meaning US$316.67.

 

The priciest soymeal came from the US, in which Japan imported  431,094 tonnes at US$155 million, or US$359.55 per tonne.

 

Imports of Chinese soymeal in the first quarter of CY2008 were 92,987 tonnes, the lowest since first quarter of CY2006, a reflection of increased demand within China itself.