Rice price surge plagues Japan CPI

A record surge in the domestic price of rice has held Japan’s core consumer price index above 3 percent for the third consecutive month in February. This has forced the Japanese Government to take unprecedented steps to address supply shortages of the food staple in a bid to ease high prices that have plagued Japan since the middle of last year.

The price of rice has soared by 80.9pc compared to the same time last year, the biggest increase seen since such data records began in 1971. Although new-crop stocks appeared on supermarket shelves last September, somewhat alleviating the supply shortage, prices have continued to soar.

In late February, Japan’s Ministry of Agriculture announced the release of up to 210,000 tonnes of rice stocks from its national emergency stockpile to address the mounting supply issue. In a strategy typically reserved for natural disaster relief and crop failure, the ministry has revised its policy to allow for rice distribution from its emergency reserves in the event of market disruption, including when supply chain issues contribute to price spikes.

The stockpiled rice is being released from a storage facility in Saitama Prefecture, where it has been stored in a temperature and humidity-controlled environment to preserve quality. The first auction was conducted last week, and on Friday, the agriculture ministry announced that it had selected bidders for almost 142,000t of rice from the government stockpile, with the extra supplies expected to start reaching retail stores later this month.

Despite reports of heat damage to last year’s crop, total rice production reached 7.29 million tonnes (Mt) of milled product, only fractionally lower than the 7.3Mt harvest in 2023. A 1.5pc increase in the average yield compared to 2023 compensated for a 1.4pc decrease in the harvested area to 1.46 million hectares.

Yields reportedly declined in the country’s western and southern growing regions due to a lack of sunshine in the early summer months and record-high temperatures from August onward, while favourable weather conditions increased yields in major rice production regions in the north.

Rice supplies started to decline last summer, triggering the initial price hike. Supermarket sales in the first seven months of 2024 were similar to the previous year. However, they jumped by 29pc in August as concerns over the tighter supply scenario grew, partly due to a government advisory about a potential megaquake that led to rice shelves being emptied in stores.

Purchases continued to exceed the previous year’s levels from September through November, even as prices kept rising and newly harvested rice entered the market, easing the supply worries. Consumers grew increasingly anxious about a rice shortage amid lingering prospects of prolonged price increases, likely prompting them to hoard supplies, as it is difficult for Japanese households to find an alternative diet staple.

The Ministry of Agriculture, Forestry and Fisheries (MAFF) doesn’t believe that there is a supply shortage of rice, but rather, the issue lies in product distribution, leading to speculation that trading houses and wholesale businesses are hoarding additional supplies in anticipation of continued price rises. MAFF hopes that the release of contingency stocks will disincentivise the hoarding practices and push those supplies to market, thereby helping to reduce prices.

MAFF runs a price support program aimed at encouraging farmers to switch from table rice to alternatives such as corn, wheat, barley, soybeans, feed rice, rice for processing and rice suitable for the export market. However, as table rice prices continue to increase and support payments remain the same, table rice has become a much more profitable option for farmers. This is expected to result in an increase in the area allocated to table rice production in 2025-26 at the expense of wheat, barley and feed rice.

While the consumption of table rice is expected to remain steady in 2024-25, total rice consumption is forecast to decrease by 1.2pc from 8.1Mt to 8Mt as a switch by farmers to more competitively priced feed inputs decreases feed rice demand. Projected rice imports of 700,000t this season are similar to 2023-24.

Another significant factor in the rice equation is the steep decline in the number of rice farms, predominantly due to the ageing Japanese farmer and their inability to work the land adequately. It is estimated that the number of rice farms fell by 43pc to 576,000 in the decade to 2023. Most farms are small-scale family operations with an average size of 1.8ha. Around 62pc of farms cultivate less than 1ha of paddy land.

Meanwhile, demand for wheat in Japan is expected to rise fractionally in the current season to 6.25Mt, with lower production supplemented by higher imports. Japan is not a significant annual producer of wheat, with 2024-25 output of 1.09Mt slightly lower than the 1.14Mt produced a season earlier. Lower production and the current supply squeeze mean imports are forecast to see a modest increase of around 200,000t to 5.55Mt. Food, seed and industrial consumption is forecast to increase slightly on the back of higher rice prices while feed and residual consumption decreases as the price competitiveness of corn improves.

Nevertheless, corn imports are projected to be unchanged at 15.3Mt in the 2024-25 marketing year. Feed and residual consumption are also stagnant at 12Mt, with a slight increase in food, seed and industrial demand reflected in a similar decrease in the 2024-25 season carry-out.

Very little change is projected on barley, with forecast imports of 1.2Mt and domestic demand of 1.4Mt in 2024-25 almost mirror images of the previous marketing year. Total consumption of barley has reportedly plateaued in recent years, with the growing intake of barley tea offsetting the weakening demand for shochu and miso. A shrinking cattle herd and competition from corn are keeping a lid on demand from the feed sector.

Australian exports of wheat and barley to Japan have started slowly this season, with a total of 520kt since the 2024-25 marketing year commenced at the beginning of October. This compares to 880,000t for the same period in 2023-24 and 790,000t in 2022-23. Wheat shipments have been relatively consistent in the 400,000-500,000t range, but barley shipments of just 110,000t are running at just over a quarter of the two previous corresponding periods. The big change has been in the demand for Australian feed barley, with imports of malting barley relatively consistent.

Tags: Production, yields, crop, stocks, Japan, shortage, consumption, price, rice