WASHINGTON, D.C., U.S. — In line with the declining livestock numbers, Japanese feed production decreased for the fourth consecutive year in market year 2014-15 (October 2014 – September 2015) , the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service reported on Jan. 28.

Japan typically imports the majority of its barley from Australia, Canada and the U.S. and the majority of its sorghum from Argentina and the U.S. However, China’s imports of barley and sorghum increased dramatically in market year 2014-15 – importing most of Australia’s exportable supply of barley and sorghum and most of the U.S. sorghum exportable supply. As a result, Japan was forced to diversify supply sources for barley and relied heavily on Argentina for sorghum.

Japan’s production of compound and mixed feed decreased 1.4% for market year 2014-15 (year ending September 2015) over the previous year.

Use of rice increased 60% in market year 2014-15 at the expense of corn, sorghum, wheat and barley. The sorghum utilization ratio in compound feed in market year 2014-15 marked a record low of 3.9%, and the composition ratio of barley was the lowest in the past seven years. Japan’s Ministry of Agriculture, Forestry and Fisheries’ (MAFF) strong push for production and use of feed rice is expected to continue in market year 2015-16, further reducing the use of other ingredients in compound feed. In recent years, the composition ratios of corn, sorghum, rice and wheat in the compound feed for poultry and swine fluctuated within the 2% to 5.5% range, with feed millers changing the composition ratios of these ingredients based on prices.

Japan maintains a feed price stabilization program that consists of a combination of a MAFF subsidy and an industry fund to help absorb sudden surges in compound feed prices. It is activated when the import cost of ingredients in a particular quarter exceeds the average import cost of ingredients in the previous year. No compensation payments were made for the first three quarters of Japanese fiscal year 2015 (April – December 2015). In the third quarter (October – December 2015), the average price of imported raw materials for compound feed (30,341 yen/tonne) was 2,909 yen ($24.20) lower than the average import cost of ingredients in the previous year, reflecting lower prices for soy meal and freight .

Aggregate barley production in Japan in 2015 was up 4.2% from 2014 to 176,900 tonnes. Barley production increased 4% due to a slight increase in the planted area coupled with an improved yield in the Kanto region supported by favorable weather, offsetting a decrease in yield due to excessive rain during planting and growing in the other major growing region, Kyushu. However, the yield in 2015 was 5% lower than the average yield of the last five years. Production of six-row barley increased 12% due to an above-average yield, thanks to favorable weather conditions, and a 5% increase in planted area. Production of naked barley decreased 23% due to a 22% drop in yield from the previous year as a result of excessive rain during planting and growing.

Aggregate annual barley (feed and food) consumption is estimated to be stable at approximately 1.3 million tonnes. Roughly 75% is consumed in the feed sector, of which over 80% is consumed by beef cattle. About 880,000 tonnes of feed barley was sold through MAFF SBS tenders during market year 2014-15 (October 2014 – September 2015). MAFF sets the import volume of feed barley for each Japanese fiscal year. For 2015, MAFF initially set an import volume of 690,000 tonnes, but with competitively priced feed barley available in Europe, Russia and Black Sea countries, 603,905 tonnes of feed barley was imported in the first seven months (April - October 2015). To allow more barley to be imported this fiscal year, in November 2015, MAFF raised the import volume for 2015 to 1 million tonnes.

For non-feed use barley, MAFF forecasts consumption of about 330,000 tonnes in 2015, of which 110,000 tonnes is expected to be supplied domestically and the remaining 220,000 tonnes to be imported. Two-row barley is used primarily for beer, and Australia is the major supplier. Six-row barley - supplied by domestic production and imports from Canada - is used for making barley tea. Naked barley is used for the production of miso (soybean paste), entirely produced from domestic barley supplies. There is little indication that barley for these non-feed uses will increase in the near future.

Barley imports decreased 15% in market year 2014-15 from the previous year due mainly to weak demand from the feed sector resulting from a decrease in the number of beef cattle. Until market year 2012-13, Australia and Canada had supplied 90% of barley to Japan. Australian exports of barley to China have soared in recent years, and Canada also increased barley exports to China to meet its strong demand.

In market year 2014-15, Japan’s imports from Australia and Canada plunged by 59% and 42%, respectively, from the previous year due to high CIF prices. Instead, Japan diversified its supply sources, importing feed barley from non-traditional suppliers such as Germany and the U.K. and Black Sea countries at competitive prices. If competitively priced feed barley continues to be available, feed barley imports are expected to increase slightly in market year 2015-16, while food barley imports are forecast to remain flat.

Almost all sorghum is used for feed, of which 90% is consumed by the swine and poultry sectors. Use of sorghum in compound feed adjusts depending on the availability and price of corn and, recently, rice. Swine numbers are expected to recover slightly in 2015 and 2016 from the 2014 reduction in the swine population resulting from the Porcine Epidemic Diarrhea virus (PEDv) outbreak