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Japan needs to reduce stocks of imported rice
The Board of Audit, Japan’s equivalent of the GAO, reports that the inflating inventory of imported rice, also referred to as Minimum Access rice or MA rice, has become a financial burden to the Government of Japan. The inventory has expanded by some 1.6 million metric tons (MT) over the last ten years and reached the record level of 2 million MT at the end of March this year, about 64 percent of which is U.S. medium grain rice. MA rice is kept in the most modern refrigerated warehouses and costs the Japanese government 17 billion yen (144 million dollars) annually. The Board of Audit is urging the Ministry of Agriculture, Forestry and Fisheries (MAFF) to take expeditious action to shrink the inventory, thus reducing its storage cost. In response, MAFF has begun releasing some of the old MA rice (some of the inventory goes all the way back to rice imported in 2000.) whose quality had deteriorated to the feed sector. This is the first time MA rice has been used for animal feed.

About 280,000-300,000 MT of rice is used in Japan’s feed sector annually. Because this year’s domestic crop size is expected to be 4 to 5% lower than a normal year and there is little inventory of old domestic rice, MAFF’s plan for this year is to supply all of 300,000 MT using old MA rice. Sales started in July with 25,000 MT released per month. Use of MA rice in the feed sector may be a quick fix but when domestic rice production returns to a normal year level, there will be unsold domestic rice that needs to find its way to the feed sector. MAFF will face the dilemma of balancing between domestic and MA rice stocks. In addition, the price of feed rice is very low: about 120 dollars/MT.
Considering the import cost of MA rice at about 530 dollars/MT, MAFF loses over 400 dollars for every ton of MA rice it sells to feed manufacturers: 120 million dollars for 300,000 MT. The cost of storage is, of course, additional.

Japan is bound by its WTO commitments to import 682,000 mt of rice per year. The reason why MAFF does not simply release that imported rice to the market is because it is bound by a Cabinet Resolution adopted by the Hosokawa Cabinet on December 17, 1993 that reads: “Imported rice is not to disrupt the supply and demand of domestically grown rice.” A Cabinet Resolution is the Japanese government’s highest policy decision. As a result, MAFF only allows a very limited amount of imported rice onto the table rice market. The rest is either: 1) sold to food/beverage manufacturers as an ingredient so that its identity is lost; 2) re-exported under food aid programs; 3) now going into the feed market; and 4) kept in air-conditioned warehouses at a huge cost to taxpayers. While this practice may seem to contradict the spirit of the WTO agreement it is not contradicting any written rules.
MGR Archive 7.11.2006
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