Monday, September 28, 2009

The low down on the Japanese wheat import system

While the Japanese have been one of our largest and most valuable wheat customers for many years, it is probably fair to say that few of us really know how the system works. Up until the last week I had no idea really, but this week one of the newest members of our team Richard Smith – our Asian foreign correspondent based in Tokyo - Japan wrote a fascinating story in the ProFarmer newsletter on how the Japanese milling wheat import system works.

Now, I have to explain a few things about Richard Smith. He talks with a very strong Japanese accent and has very Japanese mannerisms, I have deep suspicions Richard Smith is his writing alias. Anyway, I call him ‘Smithy’ and we get along fine.

Anyway, here is a snapshot of how it works. Anyone interested in the market in more depth should contact the office and become a subscriber. Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) controls both producer and resale prices of domestic and imported wheat. MAFF buys imported wheat at international prices and sells it to domestic flour millers at a markup.

In the new fiscal year 2007, MAFF started a new SBS system for food quality wheat and barley. The SBS system was set up to allow for greater flexibility of imports and transparency in a portion of food quality wheat.

There are two categories of SBS wheat imports. In Category I, MAFF purchases 240,000 to 250,000t of Australian Prime Hard amongst other wheat qualities from all around the world. The second category includes wheat varieties that are not imported under the state trading regime, to provide a vehicle for importing new varieties.

MAFF sold imported wheat at a higher price to domestic millers, while buying domestic wheat at a high price and selling it to domestic flour millers at a price lower than that of imported wheat. Revenues from transactions for imported wheat are used to help cover the cost difference between the purchase and resale of domestic wheat.

Next week I have asked ‘Smithy’ to explore how the market for noodle wheat works up there.

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