09 May 2012
Oilseeds Situation and Outlook
Soybeans, like rice, have been a staple of Japanese food culture since ancient times. It is believed that
soybeans came from China though the Korean peninsula about 2000 years ago. Since their wide
cultivation in the Kamakura era (1185-1333), soybeans have been an important protein source for the
Japanese diet. Recent research providing evidence of the health benefits of soy has further reinforced
consumer demand for soy foods. The Japanese soy industry generally requires product of superior
quality with high protein and sucrose content. Japanese manufactures utilize a variety of different soy
species that are intended for a multiple end uses. Tofu (soybean curd), is the most common end use for
soy in Japan, accounting for 57 percent of total food soybean use.
Although there is a long history of soy production in Japan, in 2011 domestic production was merely 23 percent of the volume of soy food consumption. Prospects for increased production through improved yields or other means remains limited by various factors including the lengthy rainy season, and the failure of Japanese agriculture to adopt higher biotech seeds with higher yield potential. Domestic soybean production has consistently contributed between 3-5 percent of total soybean supplies (for all uses) for the past thirty years. During that time the lowest level reached was two percent in 1995 and the highest was six percent in 2008 and 2009. Production in 2011 was 219,900 mt, down one percent from the previous year while the overall planted area decreased by one percent to 136,700 ha.
Soybean production in 2011 was 219,900 mt, approximately the same as the previous year, with yield decreasing to 1.61 mt per hectare.
Farmland dedicated to growing soybeans has often been converted from rice paddies, which comprised 86 percent of total land use in 2011. Japan’s rice production has exceeded demand for many years and MAFF has encouraged farmers to switch from rice to soybeans and other crops. At the same time, soybean dry field farming has been gradually decreased because of local municipalities’ farmland improvement policy and crop change from soybeans to high profit crops such as vegetables. MAFF has established nonbinding targets for soybean production for 2015 of 140,000 ha in total planted area, 270,000 mt in total production, and 1.97 mt in yield per hectare.
Soybean production reached 270,000 mt in 2001 and 2002, which is the targeted volume for the basic plan through 2015. Soybean yields have grown at a sluggish pace and production varies quite widely by region. A number of challenges make it difficult to achieve increases in the yield and quality of soybean production in Japan. For example, soybean production is often hampered by heavy rain and typhoons during the sowing and harvesting seasons. The ratio of lower quality soybeans, “3rd class” plus “specific end-use class”, has been relatively high for the last eight years ranging from 35 percent to 61 percent of total production. Improved and more efficient production techniques could contribute to increased soybean production. Biotech soybeans are one example of new technology that could increase yields but Japan has not produced GM soybeans commercially despite having approved ten biotech soybean varieties.
According to a 2012 Japan Biotech report, this lack of acceptance is the result of a number of factors. One important hurdle is overly restrictive local regulation. Often, events that are approved for environmental release (i.e., commercial cultivation) by GOJ, may face additional approval processes required by local governments. For instance, in Hokkaido, farmers must first host public meetings, at their own expense, with neighboring farmers, agricultural cooperative members, regional officials, and other stakeholders. At these meetings, they must announce their intention to plant biotech crops and explain how they will ensure that their crops do not mix with non-biotech crops. Secondly, farmers must complete a detailed application for submission to the governor's office explaining their plans for growing biotech crops. This application requires precise information on the methods that will be used to monitor the crops, as well as measures for preventing cross-pollination, testing for biotech contamination, and procedures for responding to emergencies. Finally, farmers must pay a processing fee of 314,760 yen (over $4,000) to the Hokkaido Governor's office in order to cover the costs of reviewing their application. Compounding these legal restrictions, farmers also require customers who will buy their biotech harvest. Therefore, such restrictions may reduce the potential advantages that biotech traits may offer.
Rapeseed is a low yield crop and requires vast amounts of land to make commercial production feasible. Total profit from rapeseed cultivation in Japan is just one tenth of rice. In 1957, the total amount of land dedicated to rapeseed was 260,000 ha. During Japan’s rapid industrial growth in the 1960-1980’s, there was a major shift in labor from the agricultural sector to commercial goods; affecting rapeseed production significantly. The liberalization of soybean imports as an alternative oilseed in 1961 further accelerated the decrease in production. Due to these factors, the amount of area dedicated to rapeseed production hit a low of 300 ha by 1999 and, though slightly higher in 2011, still amounts to just 1,700 ha. Total rapeseed production in 2011 was 1,950 mt, meeting only 0.08 percent of Japan’s annual consumption demand.
MAFF has announced targets for domestic agricultural production through 2020, with the goal of soybean production levels reaching 17 percent of total demand. The targeted volume for soybeans is 600,000 mt, almost three times as much as the 2010 production of 220,000 mt. To achieve this goal MAFF called for the following measures:
- Converting rice paddies to large scale dry fields (two hectares or more).
- Breeding and cultivation of high yield varieties.
- Improvement of cultivation techniques for soybeans.
- Product development emphasizing the characteristics of domestic varieties to create new demand.
MAFF’s target volume for rapeseed production in 2020 is 10,000 mt, ten times the current level, which could be achieved through the use of high yield varieties and better integration between crushers and farmers. This is an ambitious target that, even if realized, would result in a gain of just 0.5 percent above current production levels.
Soybeans and rapeseed are the primary oilseeds available in Japan. Soybeans are used as raw materials
in food oil production and as soy meal in feeds. Recently, consumption of soybean products has been
decreasing due to poor economic conditions. Higher prices for raw materials have, in turn, led to higher
prices for processed foods, negatively impacting overall sales. Japan’s oil production is 2.1 mmt a year
with all of demand currently met by imported soybeans. The demand for oil production has increased
dramatically from the 1960’s as the Japanese diet shifted more toward Western style cuisines that
depend on heavier oil use. Since 2004 soybean oil demand has continued to decline as prices have
escalated internationally. Domestic soybeans have generally not been used for oil production due to
much higher prices than imports and an insufficient amount of supplies having the characteristics
desired. Soybeans for food use have been about 25 percent of total consumption for a while. However,
the volume used in foods reached a low of less than one mmt for the first time in 2009, and the trend has
continued since then. Food soybeans, which are not genetically modified, are used for tofu (soybean
curd), boiled soybean, natto (fermented soybeans) and miso (fermented soybean paste), and some whole
bean soy sauce (marudaizu shoyu). Despite declining consumption of soybean food products, soymilk
alone increased 5.8 percent over previous year and it reached all-time high.
All imported rapeseed is used for oil. Rapeseed meal production is a byproduct that is used in feed and fertilizer production. In CY2011, 2.3 mmt of rapeseed was consumed in Japan, up by two percent from CY2010. A healthy image for rapeseed oil continues to sustain stable demand.
Japan’s soybean imports in CY2011 were approximately 2.8 mmt, down 18 percent from 3.5 mmt in
CY2010. However, due to higher global prices, the value of imports, $1.8 billion in CY2011, remained
virtually the same.
Soybean prices reached a record high in July 2008 on the Chicago futures market. Although the price of other grains experiencing price surges such as wheat and corn eventually returned to previous levels, oilseed prices including that of soybeans and rapeseeds have remained at a relatively high level. The crushing industry has not been able to adjust soybean oil prices to a more profitable level during the current economic downturn. Rapeseed oil products have been in a similar situation. However, earnings performance and demand for rapeseeds has been better than soybeans and the production of rapeseed oil has been stable.
The United States supplied 1.9 mmt of soybeans to Japan in CY2011, down 23 percent from 2.5 mmt in CY2010, which is 67 percent of import market share. Other major suppliers include Brazil, Canada and China. Canada and China supply non-biotech soybeans for food use. The CIF import price of soybeans in CY2011 increased 22 percent to $640/mt from $526/mt in CY2010, setting a record high year average.
Canada’s share of the Japanese rapeseed market was 97 percent in CY2011, and the average price increased by 33 percent to $661/mt from $495/mt in CY2010.
Currently the Japanese vegetable oil crushing industry uses only imported materials. Canada and Australia are the major rapeseed suppliers to Japan. No import duties are levied on soybeans or rapeseeds.
Soybean ending stocks in CY2011 decreased to 166,000 mt from 235,000 mt in CY2010. Previously, the Japanese government held an additional stock of 31,000 mt but abolished this last year. Rapeseed ending stocks in CY2011 remained the same level at 193,000 mt.
There are 13 large scale crushing plants with a combined crushing capacity of approximately 90 percent of the Japanese total. The Japanese oil crushing industry has been operating at well below full capacity.
Oil Meal Situation and Outlook:
Soybean meal is not just a byproduct in the Japanese crushing industry but an important product in its
own right, as is soybean oil. The soybean crushing process produces 190 kg of soybean oil and 760 kg
of soybean meal from one mt of soybean. In terms of demand and value, soybean meal may be more
important than soybean oil. 86 percent of soybean meal was used for feed in CY2011. The rest was
used for ingredients in soy sauce, miso (bean paste) and, soy protein foods, as well as an improving
agent for processed foods.
In line with decreased oil production, soybean meal production in CY2011 was down 15 percent at 1.58 mmt from 1.87 mmt in CY2010. However, demand for feed was 3.40 mmt in CY2011, a slight decrease from the previous year. Therefore, imports of soybean meal were 2.20 mmt in CY2011, an increase of one percent from 2.19 mmt in CY2010: a record high volume. It was the second consecutive year that Japan had imported more than two million mt of soybean meal.
Rapeseed meal and fish meal are used in feed and fertilizer production in Japan. The rapeseed crushing process produces 410 kg of rapeseed oil and 570 kg of rapeseed meal for every mt of rapeseed. Rapeseed meal production was down 2.6 percent in CY2011 to 1.23 mmt from 1.27 mmt in CY2010. Demand has remained stable at around 1.3 mmt over the last five years and the import volume of rapeseed meal has increased to fill demand. There is no tariff on soybean meal (HS 2304), rapeseed meal (HS 2306.41), or fishmeal (HS 2301.20).
Distiller’s Dried Grains with Solubles (DDGS):
The distiller’s Dried Grains with Solubles (DDGS) situation was detailed in the GAIN report, “Grain and Feed Annual 2012” (JA1007). The paragraph and the chart below are an excerpt from the report.
DDGS Imports Leap to a Record High Level:
One of the positive side-effects of the ethanol boom in the United States is the increasing availability of a high value co-product, Distiller’s Dried Grains with Solubles (DDGS). Japan’s imports of DDGS from the United Sates have been increasing remarkably and surpassed the 100,000 MT mark in 2007, and 275,000 MT in 2009. Following a slight setback in 2010, the demand for DDGS surged further as corn prices jumped. The majority of these DDGS are currently used in dairy cattle feed. Aggressive trade education activities led by the U.S. Grains Council supported this notable growth.
Oil Situation and Outlook:
The total supply of vegetable oil in CY2011 was 2.42 mmt, including 1.63 mmt from domestic
production and 0.69 mmt from imports. Vegetable oil production in 2011 was 1.63 mmt, a decrease of
3.1 percent from the previous year (1.66 mmt). However, the situation is more involved than this fact
alone would seem to indicate. Compared with the average volume between 2006 and 2008, production
in 2011 was 128,000 mt smaller, a 6.0 percent decrease. Japanese vegetable oil production has been on
a downward trend since 2000 with peak production reaching 1.89 mmt. Production of soybean oil has
especially decreased considerably. After the first confirmed BSE detection in Japan occurred in 2001
and imports of meat bone meal ceased, soybean meal and oil production was increased to fill that
demand. Soybean crushing was at its highest level in 2003 at 760,000 mt, resulting in a supply
situation exceeding demand. Since then, soybean oil production has been decreasing every year. In
contrast to soybeans, rape seed oil production has been stable at around the 950,000 mt level and
reached a record high of 1.03 mmt, offsetting the shortage in soybean oil. While oils from temperate
products have been decreasing, oils from tropical products such as palm oil and palm kernel oil have
International prices for soybean oil and rapeseed oil have been soaring, while palm oil prices have been relatively low. Around 70 percent of palm oil goes to use in margarine, shortening, instant noodles, and snacks. The rest is used for various industrial production purposes such as soap, detergent, industrial lube, resin paint, and cosmetics.
Rapeseed oil comprises the largest share of vegetable oil supplies in the Japanese market and exceeded
one million mt (including both domestic production and imports) in 2011. The second largest category
is tropical oil (palm oil, palm kernel oil, and coconut oil), which has become the major vegetable oil in
Japan. Import volumes have exceeded domestic soybean oil production since 2007.
Palm oil is the major vegetable oil imported by Japan. Unlike other oilseeds such as soybean and rapeseed, palm oil is produced from the flesh of fruit. This makes it difficult to import raw materials meeting quality specifications that are in demand for production in Japan. Malaysia dominates the palm oil market in Japan. Japan imports palm kernel oil, coconut oil, soybean oil, olive oil, and rice oil to meet various demands. Imports of soybean oil and rapeseed oil have been very minimal. The market is protected by high tariffs on soybean and rapeseed oils. The tariff for both oils is either 10.9 yen/kg or 13.2 yen/kg depending on the acid value.
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