August 23, 2012

Japan, the world's sixth-biggest wheat importer, buys five types of milling wheat from the US, Canada and Australia through import tenders and sells to millers at prices set twice a year.

The farm ministry usually revises the price of each wheat type based on a weighted average of its purchase prices in the six months to February for the first year-half and those in the six months to August for the second year-half.

The only exception after the ministry introduced the current market-oriented price-setting scheme in April 2007 was in October-March 2008, when it subsidised to curb a rise in the prices after Chicago wheat reached record highs.

"We just used the price formula this time," a farm ministry official said. "The current levels of global wheat stocks are not a source of concern. Yet, the rally in corn and soy prices has bolstered soft wheat in Chicago," he said.

Global corn and wheat prices had risen about 50% in the six weeks up to the end of July and soy by around 20% as US crops were hit by the worst drought in half a century.

The ministry's wheat selling price to flour millers for the October-March period will be an average JPY50,130 (US$638) per tonne, compared with JPY48,780 (US$621) in the previous six-month period and JPY57,720 (US$735) in the same period a year earlier.

The Japanese government keeps a firm grip on wheat imports to supplement locally produced wheat, the second most important grain after rice, and holds to strict quality standards to reflect demand from Japanese end-users for high-quality grain.

The government usually buys about five million tonnes of foreign wheat a year for milling use, which accounts for about 90% of domestic consumption. For the current fiscal year to next March, Japan plans to buy 4.78 million tonnes of foreign milling wheat.