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Food Supply Market for Japan

The following is an overview of the food supply market for Japan.

This overview addresses a wide range of topics and was based on a review of the available literature from a wide variety of sources and supplemented by interviews with persons knowledgeable about the country market.

Basic facts about the Japanese market include the following:

• Population of 126 million people.
• Gross Domestic Products (GDP) of US$3.2 trillion, making it the third largest economy in the world.
• Per capita GDP of US$23,400.
• Landmass of slightly less than that of California.

During the past decade, Japan’s economy has been in a period of recession or economic stagnation. Japan’s economy continues to be very sluggish with a relatively small projected GDP growth rate.

Table of Contents

• General Characteristics of Market & Culture
• Crops Used in Market
• Sources of Crops
• IP Crops from Field/Port to End User
• Role of Importers and Distributors
• Major Players
• Regulations Influencing Import of IP Crops
• Market Segments for IP Crops

1. General Characteristics of Market & Culture

The following information provides a summary view of the agriculture sector of the Japanese economy:

• Agriculture equals 2 percent of the nation’s GDP or US$64 billion.
• Eleven percent of the landmass is arable.
• Poultry production equals 1.2 million metric tons annually.
• Pork production equals 1.3 million metric tons annually.
• Egg production equals 42.0 billion pieces annually.
• Soybean imports from the United States equal 3.6 million metric tons.
• Corn imports from the United States equal 14.8 million metric tons.
• Wheat imports from the United States equal 3.1 million metric tons.

Information on various aspects of the market and culture follow.

Diet. The diet consists largely of rice, fresh vegetables, fruit, seafood, and small amounts of meat. Western style foods are becoming popular among the younger generation. Popular Japanese foods include tofu, noodles, miso soup, rice, fish, and pork.

Agriculture Industry. Japan’s agriculture is a highly protected and subsidized industry. There are large and powerful agricultural cooperative systems consisting of many small farmers. This sector lobbies successfully for the maintenance of small farms, high support prices, and tariffs on imports. However, the government controls the amount of land in production and pricing. Japanese agriculture is centered on the production of rice, livestock, fruits and vegetables. Rice is Japan’s most significant agricultural commodity accounting for one-third of gross agricultural income and utilizing 40 percent of Japan’s farmland.

Food Self-Sufficiency Policy. Japan currently imports over 60 percent of its food requirements.

The government has set a food self-sufficiency target of 45 percent by 2010. However, there is a trend toward increased imports due to decreases in domestic production and rapidly evolving dietary habits that continue to drive imports upwards. Japanese agricultural imports have been increasing five times more rapidly than the nation’s GDP. Agricultural production is steadily contracting.

Labor shortages and land-use policies have driven up domestic production costs, making imports increasingly competitive. Japan has also begun to establish offshore production facilities and invest in food processing ventures, particularly in Southeast Asia and China. These overseas facilities produce products specifically for the wants and needs of the Japanese market.

Food Safety. Japanese consumers and food businesses are anxious about food safety. Current concerns include E.coli, Mad Cow Disease (BSE), Foot and Mouth Disease in the EU, and Avian flu in China and Hong Kong. As a result of the appearance of BSE in Japan, Japanese consumers are moving to soybeans as a protein source. Public attention has also focused on GMO food. Some consumer groups are also concerned about the possible effect of GMO feeds on livestock product safety.

Micro-Branding. To address consumer fears regarding the safety of meat products, “micro-branding”, which often identifies the actual producer, where the animal was raised, or how it was fed, is becoming more common. Retailers believe “micro-branding” helps increase consumer confidence as well as differentiate their products from those of competitors.

Trends. Japanese consumers are becoming more value conscious and focusing more on “Kirei” (clean), “Kenko” (healthy), and “Kodawari” (good value) foods. Accountability and traceability are becoming a requirement for food inputs. The demand for organic or natural foods is growing due to consumer concerns about environment, health, and nutrition.

2. Crops Used in Market

Japan has been a traditional market for IP crops.

• Japan is the world’s largest importer of IP food grade soybeans with a use of 1.0 million metric tons annually.
• Japan's use of IP non-GMO soybeans, corn, and wheat is estimated at 9.7 million metric tons or more annually.
• Japan has an organic food market valued at US$4 billion annually which has been growing at an annual rate of over 20 percent.

The following is an overview of the uses of IP and commodity soybeans, corn, and wheat in the Japanese market.

Soybean Use

The total annual domestic use of commodity and IP soybeans equals 5.0 million metric tons with:

• Food uses at 1.0 million metric tons with an estimated 240,000 metric tons used for organic foods.
• Oil and soybean meal uses at 3.7 million metric tons.
• Feed uses at 300,000 metric tons.

Food soybeans are used for tofu (46 percent), miso (15 percent), natto (11 percent), and other food uses (28 percent) such as boiled soybeans and soy sauce. The highest value soy product is cooked beans (nimame) followed by tofu and then other products.

IP soybeans include organic and non-organic food grade soybeans, variety-specific soybeans, IOM soybeans (Number 2 commodity-type soybeans grown in Indiana, Ohio, or Michigan that have been desired by Japanese importers because of their size and other characteristics. They are separated, cleaned, and graded in Japan and resold as food grade soybeans), and other premium grade soybeans.

Soybean meal is used for feed (89 percent), industrial purposes (9 percent), and food products (2 percent) such as soy protein and soy sauce. The market for soybean meal is in a downward trend, reflecting a downward trend in feed demand. The soybean oil production is used for further refining into edible oils, margarine, and shortening (97 percent) and industrial purposes (3 percent). Japan produced most of the edible oil it consumes from soybeans.

Potential new uses of soybeans in Japan include soy-based ink and diesel fuel.

The Ministry of Agriculture, Forestry and Fisheries (MAFF) maintains an emergency soybean stock reserve amounting to 50,000 metric tons of soybeans.

Corn Use

The total annual domestic use of commodity and IP corn is 16.0 million metric tons with:

• Food uses at 5.0 million metric tons.
• Feed uses at 11.0 million metric tons.

Corn is the major ingredient used in compound and mixed feed production. Approximately 44 percent of the corn used for feed is used for the poultry industry. Total production of feed is forecasted to decline due to decreases in livestock production.

Potential new uses of corn in the Japanese market include starch-based biopolymers, biodegradable plastics, and deicers.

The Ministry of Agriculture, Forestry and Fisheries (MAFF) maintains an emergency corn (and sorghum) stock reserve amounting to 800,000 metric tons of corn.

Wheat Use

The Japanese total annual domestic use of wheat amounts to 6.1 million metric tons with:

• Food uses at 5.2 million metric tons.
• Feed uses at 900,000 metric tons.

The primary food uses for wheat are: flour (59 percent), bread (16 percent), noodles (16 percent), and other uses such as pasta and mixes (9 percent).

The market is known for its demand for exceptionally high quality in the wheat it uses. By class, Japan is a large user of hard red spring wheat as well as a major user of hard red winter and soft white wheat. The U.S. Wheat Associates has targeted the promotion of hard white wheat for use in the white noodle flour industry, which uses 35 percent of imported wheat.

Wheat consumption has been growing slowly due to a shift from rice to wheat products such as bread and pasta.

Non-GMO Use

The total annual domestic use of IP non-GMO soybeans, corn, and wheat is estimated at 9.7 million or more metric tons with:

• Soybeans at 2.4 million metric tons, equal to 48 percent of use.
• Corn at more than 1.2 million metric tons, equal to 8 percent of use.
• Wheat at 6.1 million metric tons, equal to 100 percent of use.

The major unknown factor is the amount of non-GMO corn imported from the United States for which there was no estimate made. While there is an assumption that all the soybeans imported from countries other than the United States are non-GMO, it is expected that this assumption will change in the near future.

The biotech food and feed approval and labeling law that went into effect in 2001 stimulated a demand for IP food grade non-GMO soybeans. Food and feed processors must label all food products containing approved GMO product ingredients equaling or greater than 5 percent. Importers face criminal penalties for importing any GMO crops that have not been approved or for not properly labeling products containing GMO ingredients. Many Japanese domestic food and alcoholic beverage processors have announced intentions to increase their use of non-GMO agricultural products. It is estimated that no more than 3 percent of the corn used in animal feed is GMO product.

Organic Use

The consumption of “organic” foods (including organic, no chemical, and reduced chemical) is valued at US$4 billion annually.

The primary products included in the above amount are fresh vegetables and fruits (about 70 percent), rice (about 20 percent), and processed and other foods (10 percent).

Interest in organic products is growing due to consumer’s perception that organic is symbolic for healthier, safer and more nutritious than conventional foods. This market has been growing at a rate of 20 percent, and is forecast to grow by 15 percent annually for the next several years. It is estimated that health conscious consumers will pay up to 20 or 30 percent more for an organic product over a conventional product.

In 2001 the government issued new and stricter standards for the organic food industry.

3. Sources of Crops

The following is an overview of the sources of commodity and IP soybeans, corn, and wheat in the Japanese market.

Soybean Sources

The sources of the annual domestic use of 5.0 million metric tons of soybeans are as follows:

• Imports at 4.9 million metric tons.
• The United States supplied 3.6 million metric tons. This included an estimated 1.0 million metric tons of IP soybeans: an estimated 700,000 metric tons of non-GMO soybeans; 30,000 to 60,000 metric tons of organic soybeans; and 240,000 metric tons of variety-specific and other types of premium soybeans.
• Other suppliers of imported soybeans include Brazil at an estimated 800,000 metric tons, Canada at an estimated 250,000 metric tons, China at 150,000 metric tons, and Paraguay, and Argentina.
• Domestic production at 240,000 metric tons.
• Adjusted by an increase to stock of 140,000 metric tons.

The United States is the single largest supplier of both IP and commodity soybeans in the Japanese market. However, the United State’s share of the total market has slipped in recent years to 71 percent as a result of a significant increase in soybean imports from Brazil and Canada. One of the reasons for this shift has been that Canada and Brazil are being used as a current source of non-GMO soybeans.

For many years the primary IP food grade soybeans imported from the United States were IOM soybeans. However, in recent years Japanese buyers have been switching to specific varieties of soybeans.

Currently, the largest orders of IP food grade soybeans exported to Japan call for non-GMO soybeans. It is anticipated that this will have a negative effect on the use of IOM soybeans since they have not traditionally been segregated beyond being grown in the Indiana-Ohio-Michigan region.  And, to a lesser extent, it will negatively effect the use of other U.S. IP soybeans that cannot be demonstrated to be non-GMO. The Japanese trading companies have been sourcing non-GMO soybeans in response to consumer concerns and the knowledge that the government would be instituting the labeling requirement.

U.S. organic soybeans are starting to meet stiff competition from cheaper Chinese soybeans. However, the ability of the Chinese soybeans to meet the new Japanese organic standards is unknown.

In a recent twelve-month analysis of less-than 10,000 metric ton shipments by Minnesota shippers, it is estimated that containerized shipments of food soybeans to Japan were approximately 33,145 metric tons (although it is informally known that an unknown but significant portion of these shipments were sourced outside of Minnesota).

Domestic soybeans are used for nimame (cooked beans). Japan plans to moderately increase soybean production over the next few years and increase the share of its food grade soybeans to approximately 95 percent of production. 

Corn Sources

Japan’s sources of the total annual domestic use of corn of 16.0 million metric tons are as follows:

• Imports of 16.0 million metric tons.
• The U.S. supplies 14.8 million metric tons of the imported corn of which 10.7 million metric tons is used for feed and 4.1 million metric tons is used for food.
• Other sources of corn are Argentina at 400,000 metric tons, China at 400,000 metric tons, and other countries including South Africa.
• Domestic production of 0.0 metric tons.

Japan has been the largest buyer of U.S. corn. The U.S. corn used in Japan, especially by starch manufacturers, dropped following the discovery of StarLink in the corn supply and the new requirement that all product containing more than 5 percent GMO corn or soybeans must be labeled. However, this drop should be temporary as the amount of StarLink in shipments continues to decline to zero.

It is anticipated that due to the guidelines adopted in 2001 regarding the labeling of food products with GMO product ingredients, some corn importers will be forced to shift to other supply sources such as Argentina, Brazil, China, South Africa, and France. Japanese trading companies that do not have IP handling systems are looking at non-U.S. sources for corn in order to avoid contaminating their non-GMO product with GMO product. This can create a ripple effect for other crops like soybeans and wheat since many of these big traders fill one ship with multiple grains.

In a recent twelve-month analysis of less-than 10,000 metric ton shipments by Minnesota shippers, it is estimated that containerized shipments of food corn to Japan were approximately 41 metric tons.

Japanese corn production is negligible.

Wheat Sources

The sources of the annual domestic use of wheat of 6.1 million metric tons are as follows:

• Imports at 5.7 million metric tons including 1.4 million metric tons of hard spring wheat.
• U.S. imports equal 3.1 million metric tons.
• Other imports are 1.5 million metric tons from Canada and 1.1 million metric tons from Australia.
• Domestic production at 400,000 metric tons (700,000 metric tons production less 300,000 metric tons exported).

Japan is the second largest customer for U.S. wheat. However, there has been a downward trend in the importation of wheat over the past several years and this is expected to continue.

When purchasing wheat for noodle making, millers place a higher value on white wheat originating from Australia compared to wheat from either the U.S. or Canada. The U.S. Wheat Associates is promoting U.S. hard white wheat as wheat that is superior to Australian white wheat. If they are successful in this promotion, hard white wheat will open a new market for U.S. wheat in Japan.

In a recent twelve-month analysis of less-than 10,000 metric ton shipments by Minnesota shippers, it is estimated that containerized shipments of food wheat to Japan were approximately 332 metric tons.

Japan’s flour millers would be expected to switch to non-U.S. sources for wheat if U.S. suppliers started shipping GMO wheat.

Non-GMO Sources

The sources of the annual domestic use of non-GMO soybeans, corn, and wheat of an estimated 9.7 million or more metric tons are as follows:

• Imports at 9.2 million or more metric tons.
• U.S. imports equal 4.1 million or more metric tons.
• Other imports are 5.1 million metric tons.
• Domestic production at 500,000 metric tons.

Organic Sources

The primary sources of organic soybeans, corn and wheat in Japan appear to be domestic.

The U.S. is a significant supplier of organic crops, and it is estimated that 30,000 to 60,000 metric tons of organic soybeans are shipped to the market annually. This volume is, however, very volatile depending on U.S. production and the relative price of organic soybeans from other markets such as China.

China is expected to become a source of supply in the future.

4. IP Crops from Field/Port to End User

The following comments discuss various steps in the handling of commodity and IP crops in Japan.

Ports of Import. The main ports for large bulk grain cargo ships (Panamax type) are Hachinoe, Kashima, Chiba, Kawasaki, Yokohama, Nagoya, Kobe, Mizushima, Hakata, Shibushi and Kagoshima.

Import Inspection & Quarantine. All imported grains, beans, oil seeds, and other agricultural products are inspected for compliance with sanitary and GMO regulations. Bulk cargo is inspected in the ship’s hold or in the barge into which the product has been unloaded at the port of entry. Containerized shipments are inspected in the container yard after unloading. The product may be quarantined at the port of entry and infested cargos will be fumigated. If unapproved GMO product is found (zero tolerance) in a shipment, the shipment must be disposed of or shipped back to the country of origin.

Forwarding After Inspection. After inspection or quarantine, bulk shipments may be loaded onto coasting vessels to be forwarded to other local ports. After inspection or quarantine, containerized cargo is railed or trucked to its destination.

Traceability. The USDA and its Japanese counterpart have developed a set of guidelines for handling IP crops from farm production to the food manufacturer in Japan. The procedures contain detailed information regarding records, certifications, and certificates that are required at each step in the process.

Import Product Handling. The following is an example of the steps involved in the import of a typical bulk IP non-GMO shipment of corn or soybeans.

• Ship arrives in port.
• Importer receives the commercial documents and certifications (including the following non-GMO collection, storage and transportation non-commingling certifications): country elevator certificate; river elevator certificate, export elevator certificate. Importer retains certificates for two years. Importer prepares non-GMO certificate for port warehouse and retains copy for two years. Port warehouse receives importer non-GMO certificate and retains for two years.
• Government conducts inspection and takes samples.
• Port warehouse cleans port warehouse handling equipment and storage facilities (appropriate to the potential for contamination outside tolerances) and conveys product into storage. Port warehouse cleans equipment and pre-cleans and pre-sorts product. Transportation company cleans equipment, has equipment loaded with product, transports to wholesaler facility.
• Port warehouse prepares non-GMO certificate and retains copy for two years. Wholesaler receives importer and port warehouse non-GMO certificates and retains for two years.
• Wholesaler cleans handling equipment and storage facilities and conveys product into storage. Transportation company cleans equipment, has equipment loaded with product, transports to processor facility.
• Wholesaler prepares non-GMO certificate, attaches importer and port warehouse certificates, and retains copy for two years. Processor receives importer, port warehouse, and wholesaler certificates and retains for two years.
• Processor cleans handling equipment and storage facilities and conveys product into storage. Processor cleans equipment and cleans and sorts product. Processor cleans processing equipment and processes product. Transportation company cleans equipment, has equipment loaded with product, transports to manufacturer facility.
• Processor prepares non-GMO certification and attaches importer, port warehouse, and wholesaler certificates and retains copy for two years. Manufacturer receives importer, port warehouse, wholesaler, and processor certificates and retains for two years.
• Manufacturer cleans processing equipment and processes and packages product. Manufacturer produces product.
• The process would be similar for a containerized shipment expect that the port warehouse step would be eliminated since the container would typically be delivered direct to the wholesaler.

5. Role of Importers and Distributors

Traditionally, U.S. exporters of crops did not sell directly to end users in the Japanese market. All sales were made to trading companies that in turn sold product through a multi-layered distribution system to end users. The Japanese distribution system is now in a period of transition, and direct buying by end users is becoming more commonplace even though the trading companies are still a major player in the distribution system.

Typical Distribution Channel. A typical multi-layered distribution system might consist of the following players: trading company’s U.S. subsidiary, trading company in Japan (importer), primary distributor, secondary distributor, and end user. In some cases the trading company may sell the product to a processor (crusher) or large end user.

New Distribution Channel Options. The major Japanese trading companies have U.S. offices that purchase corn, soybeans, and wheat here in the Unites States for shipment to the Japanese market. Smaller Japanese trading companies, specialty importers, and larger end users may buy direct from U.S. suppliers or may have U.S. buying agents that arrange the purchase and shipping of product to the Japanese market

Wheat Distribution Channel. Wheat is highly controlled by the government. The Japan Food Agency (JFA) sets the price for domestic wheat and imports and sets the price for 90 percent of the imported wheat. Therefore, the distribution system for wheat is unique for Japan. The JFA sets specifications and issues tenders, and about 30 companies are eligible to purchase imported wheat on behalf of JFA (e.g., Japanese trading companies). The remaining 10 percent of import volume can be imported directly by flour millers. The flour millers issue private tenders and, as a general rule, use the services of a trading company to purchase the product. Opportunities for U.S. hard white wheat would be outside of the JFA tenders. 

Case Example. A case example of how Yamazaki Bakeries, the largest commercial baking company in Japan, purchases wheat is as follows: An estimated 50 percent of its input comes from major trading companies, 40 percent from specialty importers, 9.5 percent from specialty wholesalers, and 0.5 percent direct from overseas producers.

6. Major Players

A list of some of the major players in the Japanese commodity and IP crop market identified in the profiling section of this study include the following:

Governmental Agencies. Japanese Ministry of Agriculture, Forestry, and Fisheries (MAFF) is responsible for regulating agriculture. Japan Agricultural Standards (JAS) establishes quality standards that are accepted throughout Japan. Japan Food Agency (JFA) is the governmental agency that purchases 90 percent of the wheat imported into Japan.

Trading Companies. The major trading companies importing soybeans, corn, and wheat include the following: Dah Chong Hong (Japan) Ltd.; Daiho Trading Co.; Itochu Corporation; Kanematsu Corporation; Marubeni Corporation; Mitsubishi Corporation; Mitsui & Co.; Nichimen Foods Corporation; Tomen Corporation; Toho Bussan Kaisha Ltd.; Unicoop Japan.

Some of the smaller trading companies and primary distributors include: Kaneda Co.; Meishin Trading Co.; Yamaguchi Co.;Tateno International Inc.; Yoshida Bungo Co.

Potential Customers. Some of the major end users include the following: Ajinomoto Oil Co.; Honen Corp.; Japan Maize Products Co.; Kikkoman Co.; Marukin Shokuhin Kogyo Co.; Nippon Flour Mills Co.; Nisshin Oil Mills Co.; Osta Yushi Co.; Riken Norsankako Co.; Snow Brand Co.; Yamazaki Baking Co.; Yoshidago Co.

7. Regulations Influencing Import of IP Crops

The following regulations influencing the import of commodity and IP crops into Japan were identified during the study.

GMO Tolerance & Labeling. New rules were adopted in April 2001 setting GMO tolerance levels and labeling requirements for certain foods. The new rules set a zero tolerance for food imports (a 1 percent tolerance for feed imports) containing unapproved gene-altered products. The rules require labeling for approved GMOs in food products. Under the new rules, Japan allows food products containing less than 5 percent of approved biotech crops such as corn and soybeans to be labeled as non-GMOs.

Organic Regulations. The Ministry of Agriculture, Forestry and Fisheries (MAFF) issued the Japan Agricultural Standards (JAS) for Organic Agricultural Products in 2001. The standards cover organic, no chemical, and reduced chemical products. The standards allow for third party certifying organizations. Certifications are available through U.S. recognized certifying organizations. Certified consumer product carry a JAS organic label.

Wheat: The Japan Food Agency (JFA) regulates and administers the system for wheat imports. There have been some recent policy reforms related to both the importing and marketing of wheat due to factors such as excess capacity of the domestic milling sector and the high costs of subsidizing domestic wheat growers. Regulations are changing in ways that will create a more transparent and competitive market structure. Under the new wheat policy, flour millers will be allowed to directly import 10 percent of the imported wheat while the JFA will continue to control the importing of the remaining 90 percent of wheat.  Deregulation is also a factor. Both GATT and WTO negotiations have reduced Japan’s import tariffs on wheat.

8. Market Segments for IP Crops

The following is a summary of major market segments in Japan that are potential users of Minnesota IP crops.

Food Industry Market Segment

The food industry segment uses a total annual amount of 11.2 million metric tons of soybeans, corn, and wheat -- 1.0 million metric tons of soybeans, 5.0 million metric tons of corn, and 5.2 million metric tons of wheat.

The various sub-segments of the industry are configured differently. Soymilk producers tend to produce only soymilk, but some may also produce tofu. Tofu producers tend to be small and produce only tofu. There are a small number of large companies that produce both tofu and natto.

Minnesota suppliers of IP food grade crops have the option to sell their product into all the channels of distribution, including the major trading companies through their U.S. offices, direct to smaller trading companies and primary-level distributors, and to larger- and medium-size end users. Based on the information collected in the customer profiling section of this study, all types of Japanese buyers of IP food grade crops expressed an interest in purchasing direct from Minnesota IP suppliers – end users, small trading companies and primary-level distributors, and large trading companies.

The U.S. is the largest import supplier of IP food grade and organic product to the market. Minnesota is already a significant supplier of IP food grade product to Japanese buyers. Many of the companies contacted in the profiling section of this report indicated that they currently purchase product directly from Minnesota suppliers. A recent twelve-month analysis of exports by Minnesota-based shippers to Japan indicated that containerized shipments of soybeans totaled 33,145 metric tons (although it is informally known that a large portion of these shipments thought to be from Minnesota shippers were sourced in other states), corn totaled 41 metric tons, wheat totaled 332 metric tons, and edible beans totaled 20 metric tons.

Non-GMO Food. It is estimated that the use of IP non-GMO soybeans, corn, and wheat is 9.7 million metric tons. The market demand for non-GMO continues to increase since every food manufacturer in Japan demands non-GMO product. Most food manufacturers voluntarily put a non-GMO label on their product because Japanese consumers prefer non-GMO products.

Organic Food. The organic market is valued at US$4 billion. It consumes an estimated 240,000 metric tons of IP food grade soybeans. The organic segment of the food market has a 15 to 20 percent annual rate of growth.

The challenges to Minnesota IP suppliers includes the following: Convince food grade soybean end users to directly contract for and purchase soybeans from growers and local suppliers. Convince flour millers to use their import quota to directly purchase wheat from growers and local suppliers.

Some of the major Japanese food industry players, as well as potential customers identified in the profiling section of this study, are listed below. (See the following table for a brief profile of potential customers and Volume 2 for a detailed list of potential customers.)

Dah Chong Hong (Japan) Ltd.; Daiho Trading Co.; Itochu Corporation; Kanematsu Corporation; Marubeni Corporation; Mitsubishi Corporation; Mitsui & Co.; Nichimen Foods Corporation; Tomen Corporation; Toho Bussan Kaisha Ltd.; Unicoop Japan; Kaneda Co.; Meishin Trading Co.; Yamaguchi Co.; Tateno International Inc.; Yoshida Bungo Co.; Ajinomoto Oil Co.; Asahiya Shokuhin Co.; Honen Corp.; Japan Maize Products Co.; Kikkoman Co.; Kume Quality Co.; Maruichi & Co.; Marukin Shokuhin Kogyo Co.; Miyasaka Jozo Co.; Nippon Flour Mills Co.; Nisshin Oil Mills Co.; Odakyu Shokuhin Co.; Osta Yushi Co.; Riken Norsankako Co.; Snow Brand Co.; Taishi Shokuhin Kogyo Co.; Takano Foods Co.; Tokyo Best Shokuhin Co.; Yamazaki Baking Co.; Yoshidago Co.

Animal Feed Industry Market Segment

Total compound and mixed feed production equals 24.0 million metric tons with 23.2 million metric tons used for compound feed and 800,000 metric tons used for mixed feed.

Feed production is dominated by poultry. The allocation of the compound feed by animal is 10.6 million metric tons for poultry, 7.2 million metric tons for cattle, and 6.2 million metric tons for swine.

The total production of feed has been declining in recent years by about 2 percent annually, and this decline is expected to continue. In 1993 feed production was 30 million metric tons.

Soybean meal is the primary protein ingredient used in compound feed production in Japan with about 90 percent of all soybean meal used for feed production. Reflecting stagnant demand for feed from the livestock sector, total meal consumption will likely continue to decline.

The decline in the number of Japanese livestock farmers is caused by factors including an aging farming population, lack of successors for livestock farmers, increases in meat imports, and the fear of BSE disease. As a consequence, the livestock population is dropping.

The challenges to Minnesota IP crop suppliers include the following: Educate feed mill operators, as well as their soybean meal suppliers and feed customers, on the increased output value, cost effectiveness, and improved efficiencies of Minnesota IP crops. Convince the feed mill operators, as well as their soybean meal suppliers, to specify Minnesota IP crops when purchasing crops. Encourage feed mill operators, as well as their soybean meal suppliers, to purchase direct from Minnesota suppliers. Minnesota IP crops that have trade names, such as Norsoy ™, will assist customers in specifying Minnesota IP crops, especially if they are purchasing through an importer.

Some of the major Japanese feed industry players, as well as potential customers identified in the profiling section of this study, are listed below. (See the following table for a brief profile of potential customers and Volume 2 for detailed profiles of potential customers.)

Honen Corp.; Itochu Feed Mills Co.; Kato Oil Manufacturing Co.; Nestle Japan Co.; Nippon Formula Feed Manufacturing Co.; Nisshin Flour Milling Co.; Norsan Corporation; Sugihara Industrial Co.; Snow Brand Co.

The following is a brief review of the various segments of the animal feed industry that generate the demand for manufactured animal feed.

Poultry Feed. The use of feed for poultry is 10.6 million metric tons annually.

Japan produces 1.2 million metric tons of poultry annually. Japan’s poultry meat imports are forecast to increase nearly 4 percent in 2002 to 710,000 tons. Domestic poultry production has been holding level, but tightening consumer spending has been an impediment to expanded poultry sales.

Per capita consumption of poultry is currently 14 kg.  This is expected to remain fairly level or increase only slightly.

The production of eggs equals 42.0 billion pieces annually.

Swine Feed. The use of manufactured feed for swine is 6.2 million metric tons annually. Pork is a significant part of the Japanese diet, ranking behind only fish in consumption. Japanese pork production equals 1.3 million metric tons annually with imported pork at almost 900,000 metric tons. Japan’s domestic production has remained relatively stagnant while imports are projected to increase by about 3 percent.

Total domestic pork production is expected to decline approximately 1 percent through the end of 2002 and then continue to decrease 1 to 2 percent annually through 2007. These decreases will result primarily from increasing environmental regulation and higher production expenses associated with raising hogs. Also, migration from Japan’s rural areas to the cities continues to fuel consolidation throughout the industry with the number of hog farms dropping from 36,000 in 1991 to approximately 11,700 in 2000. During this same time period, the average number of hogs per farm has increased from 315 to 838.

Japan’s self-sufficiency in pork production is projected to decrease from the current 60 percent to an estimated 52 percent by 2006. It is anticipated that the Japanese government will strive to maintain self-sufficiency at or above the 50 percent level. Domestic pork production is protected by the government if imports reach a threatening level. This safeguard action raises the mandated minimum import price (known as the gate price).

Per capita consumption of pork is currently 16.5 kg (36 pounds). This is expected to remain fairly level or increase only slightly.

Cattle Feed. The cattle feed for beef and dairy animals used in the market is 7.2 million metric tons annually.

Beef. Japan’s beef production is 510,000 tons and has been falling due to several factors, while beef imports are forecast to increase to 960,000 tons. Overall, the recovery of beef demand will largely be predicated on the effectiveness of efforts to regain consumer confidence in the meat inspection system due to the BSE case in late September 2001. The Wagyu sector growth has been hindered by small-scale Wagyu calf rearing operations. Despite the government’s beef calf deficiency payments program, Wagyu production is hindered by a shortage of young farmers.

Domestic production of beef is expected to decline approximately 1 percent per year in the near term and is attributable to higher expenses associated with livestock production. In addition, migration from Japan’s rural areas to the cities continues to fuel consolidation throughout the industry with the number of beef cattle farms dropping from 154,900 in 1996 to 116,500 in 2000, which is nearly a 25 percent decrease in the last five years. During this same time period the average number of cattle per farm has increased from 19 to 24. According to the U.S. Meat Export Federation, a key factor influencing future domestic beef production is the anticipated liberalization of the Japanese dairy industry during the next trade round. Liberalization of the dairy market will reduce the number of dairy farmers, thus reducing the amount of domestic Holstein beef produced. Japan is currently about 35 percent self-sufficient in beef production. It is estimated that self-sufficiency will drop to approximately 30 percent by 2005.

Overall beef consumption is currently at approximately 8.4 kg per capita and expected to increase to about 9 kg over the next several years. Although the population growth rate is just 0.3 percent, consumption growth will increase at a higher rate as slight improvements in the economy help stimulate beef consumption. This growth in consumption is expected to be about 1 percent annually. However, Japanese consumers eat less beef on a per capita basis than either fish, pork or poultry.

Dairy. Japan’s dairy sector is also facing declines in farm and cow numbers. This sector supplies more than half of Japan’s total cattle slaughter, including F-1 crossbred cattle. In Japan, F-1 cross bred calf rearing has become a profitable side business for many dairy farmers, as Wagyu-Holstein crossbred calves get higher prices than Holstein calves in the beef cattle market. Rearing of F-1 calves in the dairy sector in Japan has expanded over the last 10 years.

Pet Food. The pet food market uses approximately 750,000 metric tons of food valued at approximately US$2.0 billion. The market has been growing, although it too has slowed in recent years. About half of all the pet food used is imported, primarily from the United States and Australia. The pet food produced in the market relies heavily on imports of grains and byproducts.

Oil Crushing Industry Market Segment

The crushing industry uses 3.7 million metric tons of soybeans annually.

The U.S. supplies approximately 2.9 million metric tons of the crushing soybeans or about 78 percent of the soybeans crushed.

There are approximately 90 domestic oil crushing factories in Japan. However, the number of crushers has been declining gradually over the years.

The soybean oil crushing industry produces crude soy oil and soybean meal. The oil production is used primarily by oil refiners for the production of edible oils, margarine, and shortening. The soybean meal production is used primarily by animal feed manufactures for animal feed, although some soybean meal is used by food manufacturers for further processing into such products as soy protein and soy sauce.

The challenges to Minnesota IP crop suppliers include the following: Educate crushing operators, as well as their feed mill customer, on the increased output value, cost effectiveness, and improved efficiencies of Minnesota IP crop. Convince the crushing operators to specify Minnesota IP crops when purchasing corps. Encourage crushing operators to purchase direct from Minnesota suppliers. Minnesota IP crops that have trade names, such as Norsoy ™, will assist customers in specifying Minnesota IP crops, especially if they are purchasing through an importer.

Some of the major Japanese oil industry players, as well as potential customers identified in the profiling section of this study, are listed below. (See the following table for a brief profile of potential customers and Volume 2 for a detailed list of potential customers.)

Marubeni Corp. (the largest oil crusher in Japan); Nisshin Oil Mills; Honen Corp. Co.; Ajinomoto Co.; Showa Sangyo; Yoshihara Oil Mills; Riken Norsankako Co.; Nikka Fats & Oils Co.; Rinour Oil Mills Co.; Asahi Yushi Co.; Crossroads Oil Co.; Fuji Oil Co.; Kato Oil Manufacturing; Yoshida Bungo Co.

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