Japan creates new SBS import category for wheat

by Holly Demaree
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WASHINGTON, D.C., U.S. —Starting in October Japan will begin implementing a new Simultaneous Buy-and-Sell (SBS) import category covering all wheat classes. The new import policy will provide more options for Japanese flour millers to import, according to a May 30 report from the Foreign Agricultural Service (FAS) of the U.S. Department of Agriculture (USDA).

The new policy being implemented by Japan’s Ministry of Agriculture, Forestry and Fisheries’ (MAFF) allows up to 20,000 tonnes of wheat to be imported per year. The USDA said that imports under category three of the policy are not obligatory if the general import system or another SBS category can be utilized.

USW_Steve Mercer VP of Communications_photo cred USW
Steve Mercer, vice-president of communications for USW.

“This change is consistent with a very deliberate experiment by MAFF to see if it can transition to a different method of wheat importing and domestic distribution,” said Steve Mercer, vice-president of communications for the U.S. Wheat Associates (USW).

According to the USDA, MAFF purchases major classes of food wheat from multiple regions around the world and it utilizes a tendering system to transport its imports.

“Japan has very high-quality standards for milling wheat to serve consumer demand for very high-quality food products,” Mercer said. “Even if MAFF opened the entire volume of milling wheat to an SBS system, U.S. wheat exports would likely not change much. Our current market share average is 55% (includes soft white wheat from the PNW, spring wheat from the Northern Plains and hard red winter wheat from the Northern and Central Plains), followed by Canada (spring wheat) at about 25% and Australia (for noodle wheat) at about 18%.”

In order to import the correct amount and class type of wheat MAFF receives applications from Japanese flour millers four months before the wheat is needed, the USDA said. MAFF focuses on grade, class, quantity and type of import (bulk or container), taking into account international prices, freight, and the exchange rate when importing wheat.

Three times a month, MAFF-licensed importers offer tenders and MAFF accepts the ones lower than its intended purchase price.  According to the FAS, any wheat classes, excluding Durum and Prime Hard, can be imported under this system (but only if a purchase application reaches a level to fulfill the bulk shipment).

After purchase MAFF then sells the wheat domestically at a higher price due to port and inspection charges that were made during the import purchase. The USDA noted that mark-up charges are currently 17 yen per kilogram.

“To ensure domestic prices better reflect international prices, MAFF revises the re-sale price of imported wheat twice a year (issuing a price for the period April – September and a price for the period October – March),” the USDA said.

Before the imported wheat arrives, MAFF and flour millers agree on a buy-and-sell contract so after it arrives and is inspected the flour miller can immediately purchase the contracted volume.

“Now, with wheat imported for milling into flour, MAFF buys and handles logistics, then sells it at a published (and amended 2x/year) price to domestic flour mills,” Mercer said. “Any positive margin is earmarked to help support a relatively small domestic wheat production. SBS is already in place for feed wheat...and it means MAFF buys and does logistics but immediately sells at the purchase price to feed millers.”

The USDA noted, all feed wheat, except for Australia, is imported in bulk shipments under the SBS import system operated by MAFF. Import quotas are also set up for feed wheat. In 2016, 600,000 tonnes of feed was imported.

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