August 5, 2010

Japan may replace corn in feed with rice as state stockpiles swell

The Ministry of Agriculture, Forestry and Fisheries may supply rice as an alternative to imported feed grains such as corn from state stockpiles, which stood at 980,000 tonnes on June 30.

Japan may import less of the grain if it begins selling surplus rice from stockpiles meant for human consumption to local feed makers. Rice sales could be as much as 700,000 tonnes a year, based on demand from Japanese feed mills, said Masachika Murai, director at the ministry's rice policy planning division.

Self-sufficient in rice, Japan is saddled with surplus supplies as domestic consumption has been shrinking due to an aging and declining population. According to the July 30 report from the ministry, domestic food rice stockpiles, including those held by the private industry, may climb to 3.24 million tonnes at the end of next June, the highest level since 2003.

"The government's sales of rice for feed may alleviate oversupply, but they are not the solution to the problem," said Takaki Shigemoto, an analyst in Tokyo.

Japanese growers should become price-competitive so that they can sell surplus rice in the international market, as global grain supplies are expected to become tight in the long term on a rising population and the growth of emerging economies, Shigemoto said. Japan protects local farmers from foreign competition with a 778% tariff on imports, keeping domestic rice prices far above the global level.

Last year, Japan imported 10.6 million tonnes of corn for feed use from the US, data from the Ministry of Finance show. The purchase from the biggest exporter represented 96% of Japan's total corn imports. Corn futures in Chicago have fallen 2.6% this year.

The government holds about one million tonnes of domestic rice in its reserve in case domestic production falls short of demand due to bad weather. The ministry purchases newly harvested grain to replace its sales of older rice from warehouses.