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Japan's Butter Supply Deficit Forecast to Stay

23 November 2012

USDA Foreign Agricultural Service

JAPAN - Japan’s 2013 fluid milk demand and supply outlook is not expected to improve greatly on 2011. National fluid milk output, projected at 7.54 million MT, will likely not improve butter supply deficit and will most likely force Japan to import roughly the same amount of the current access butter during Japan Fiscal Year (JFY) 2013 as last year.

In 2012, Japan’s fluid milk demand and supply outlook improved slightly from the previous semiannual forecast, particularly for processing use. Meanwhile, weaker than anticipated demand is expected to lower the utilization of fluid milk for drinking on an annual basis. As a result, annual domestic output of butter is projected to rise more than last year, but will still be below levels in 2010.

Therefore, this projected increase may not be enough to resolve the current deficit in the butter supply that has prevailed over the last few years.

For JFY 2012, Japan committed to its current access butter import of 7,500 MT with the government making an additional importation of 2,000 MT. However, despite these interventions, the market price for domestic butter still remained high, causing total demand to contract.

The NFDM supply situation in 2012 was not bright either. Ingredient demand for NFDM became somewhat lethargic partly due to high market prices and the increased use of alternative ingredients (non-fat concentrate milk derived from cream and also from butter production).

One bright spot in the Japanese dairy sector in 2012 was the continued increase in demand for cheese. Growth in market demand resulted in another record-breaking year for both consumption and imports of cheese.

Robust market demand for cheese for shredding was integral in boosting imports of American natural cheese, which is typically used for products such as pizza and baked goods. Therefore, Japan’s 2012 imports of American cheese are projected to increase to 25,000 MT – 26,000 MT, repeating last year’s record; with a 10 percent share of the cheese import market, the United States is expected to remain Japan’s third top supplier, following Australia and New Zealand. For Japan’s 2013 fluid milk supply and demand outlook, dairy farmers will likely face difficulty in sustaining the recovery that began in 2012.

The steady growth in fluid milk output that is projected for Hokkaido will most likely not offset the ongoing decline in production that is taking place overall nationally.

One of the main reasons causing the decline in dairy output of non-Hokkaido prefectures may be the high price for hay cubes/fodder imports. Post projects that Japan will be able to produce the same level of domestic butter and NFDM as last year, but this amount will still not be sufficient to alleviate the continuing deficit in butter and NFDM supplies (even assuming Japan’s JFY 2013 subsidy for fluid milk for processing use remains the same level as the previous fiscal year).
,Br>In light of the above, Post projects Japan will continue to import butter using the JFY 2013 current access (estimated at 9,000 MT) allocation.

For cheese, high global market prices that are forecast in 2012/2013 appear to be overshadowing the 2013 demand outlook and may limit the growth of imports from all major suppliers, including the United States.

Further Reading

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