July 16, 2010
Japan skips wheat purchasing on new stockpiling system
Japan delays its import tenders until local millers have decided how much they will buy under the system that will replace state stockpiling on October 1.
The Ministry of Agriculture, Forestry and Fisheries, which tenders almost every week to purchase milling wheat from the US, Canada and Australia, skipped buying so far this month because end-users are cautious about setting their requirements under the new system, said Shirara Shiokawa, director at the ministry's grain trade division.
The government, which controls overseas purchases and domestic sales to stabilize supply, will end the state stockpiling system, which holds 1.8 months of demand. Millers will have to boost grain inventories to at least 2.3 months, or about 70 days, in reserves from 15 days. Global wheat prices have surged 23% this month on dry weather in Russia.
"It takes time for us to adjust to the new method. The ministry will set wheat- purchasing plans based on hearings from 96 millers across the nation about their monthly demand. In the next regular tender, the ministry will buy cargoes for shipment in September, which are expected to arrive in Japanese ports in October. The date of the next tender hasn't been set," Shiokawa said yesterday.
The ministry has so far bought 1.29 million tonnes of milling wheat through regular tenders for shipment by August 10 this fiscal year. It purchased 4.26 million tonnes in the year ended March 31, 2010.
Japan, which imports almost 90% of its wheat, hasn't changed its March 30 forecast that it will boost imports by 3.3% to 4.96 million tonnes this fiscal year. This would be the largest volume in four years as domestic production was cut by wet weather last year.
The state trading system was designed to ensure supplies for consumers and protect domestic growers from competition from overseas shippers. The government may ease control over imports by raising the volume it buys under the so-called simultaneous buy and sell system, or SBS, creating opportunities for exporters such as Russia and France to sell to Japan.
About 7.7% of food wheat imports last fiscal year were through the SBS system, which started in April 2007 and allows purchases from any country. Food makers and trading companies jointly bid for grain under the system, which was introduced to loosen the government's grip on imports.
The agriculture ministry plans to hold regular tenders three times a month and a SBS tender once a month under the new stockpiling system.
The September-delivery contract declined 0.5% to US$5.9275 a bushel on the CBOT at 11:31 a.m. Tokyo time after advancing yesterday to the highest since November 23, 2008, on speculation that a prolonged dry spell will widen crop damage in Russia.
