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USDA GAIN: Dairy and Products


15 June 2012

USDA GAIN: Japan Dairy and Products Semi-Annual 2012USDA GAIN: Japan Dairy and Products Semi-Annual 2012

Post forecasts a moderate recovery in 2012 for Japan’s allocation of fluid milk for processing use, and as in the previous year, sizable amounts still being used for cream and cheese production. Japan’s butter supply outlook remains uncertain. Despite Japan’s early commitments for the current access to import 7,459 MT of butter, (on top of the sizable 2011 purchases of 14,024 MT) the annual supply may still be unable to meet any increases in demand that are forecast. Japan’s 2012 total cheese imports are expected to expand more than previously forecast due to weakening EU and Oceania prices. Despite this increased competition, Japan’s imports of American cheeses are forecast to exceed last year’s level.
USDA Gain Report - Dairy and Products

Commodities:

Dairy, Milk, Fluid
Dairy, Butter
Dairy, Milk, Nonfat Dry
Dairy, Cheese

[For Production, Supply and Demand Data Statistics, please download the document]

Author Defined:

Preface:

This report is an update to JA 1047, the 2011 Japan Dairy and Products Annual (12/15/2011). Post’s previous PS&D preliminary projections for 2011 and 2012 annual outlook has been further revised based on the latest calendar year data (Jan. – Mar., 2012) available for domestic production, stocks, and imports published (preliminarily) by the Government of Japan (GOJ).

The data discussed in this report are on a calendar year basis unless specified otherwise. For convenience sake, Post’s reference to Japan’s current access for dairy commodities, so called the minimum access, and dairy subsidies is based on the Japanese fiscal year (JFY: Starting April and ending March next year ). In the last Uruguay Round Trade Talks, GOJ agreed to the commitment of import purchases for designated dairy commodities through state trade (up to total milk equivalent of 137,000 MT), which include butter, NFDM, edible whey, butter oil, and dairy spread.

The conversion coefficient Post used to calculate milk equivalent volumes for each commodity are: NFDM (6.48), Edible Whey Powder (6.84), Butter (12.34), Dairy Spread (12.34), and Butter Oil (15.05)

2012 Market Outlook for Fluid Milk, NFDM, Butter, and Cheese (Revised)

Fluid Milk Section:

Weak Recovery of National Outputs May Cause Continued Lack of Fluid Milk for Processing Use

Post still projects that that more cows were put into milking at the beginning of 2012, up around one percent at 815,000 heads (unchanged from the annual report). Readers should note that Japan’s 2012 year-beginning dairy herd inventory data will be publicized sometime in July and could change the above projection. Japan’s 2012 feed distribution, production, and supply for dairy cows have almost been restored back to a normal cycle, which should slightly improve Japan’s average output per cow more than last year at around 9,313 kilo.

In light of the above, Japan’s national 2012 milk outputs are now projected to rise by one to two percent at around 7.59 million MT (just marginally above Post’s previous projection), which is still two percent lower when compared to 2010. Hokkaido’s total output is projected up by one to two percent and this province will continue to account for more than 50 percent of the national output. The combined outputs of other regions may also rise by one percent or more, a small rebound (previously projected as a small decline) from a six percent plunge experienced last year.

A 2012 first quarter recovery in Japan’s factory use of fluid milk points to an improved outlook for overall consumption of drinking milk products for this year. Based on the above, Post adjusted Japan’s 2012 utilization of fluid milk for drinking use slightly upward to 4.08 million MT (up one percent from the 2011 actual). For fluid milk for processing use, Post still projects modest growth at 3.44 million MT (up three percent from the 2011 actual).

As last year’s solid demand for domestic cream and cheese may continue through 2012, the same or higher amounts of fluid milk for processing use, especially in Hokkaido, may be allocated for these products (Table 1 and Table 4). Furthermore, shipments of fluid milk from Hokkaido to other regions for drinking use are reportedly persisting. Given these competing demands, securing sufficient amounts of fluid milk for domestic butter and NFDM production continues to be a major issue for the government and the domestic dairy industry. To encourage dairy farmers to divert their milk for more butter and NFDM production, GOJ raised its subsidy payment for fluid milk for processing use for JFY 2012 by two percent (or JP 12.2 yen per kilo of fluid milk) by setting the eligible quota at 1.83 million MT (See Table 2). However, despite this incentive, producers still seem to prefer cream and cheese production. [For Tables 1 to 4, please download the document]

Butter Section:

Continued Butter Supply Deficit Met by the Current Access Imports in 2012

As outlined in the Fluid Milk Section, Japan’s 2012 butter supply outlook is looking increasingly uncertain. There is doubt if national butter outputs will meet Post’s previously projected level of 70,000 MT (up 11 percent over the 2011 actual) as this depends on availability of fluid milk later this year. First quarter production rose only one percent when compared to the same period last year (Table 4). Post has left its butter projection unchanged, assuming some recovery will occur later this year. However, Japan’s butter demand outlook was adjusted and will remain contracted with only a small recovery projected at this time. Therefore, Post revised total consumption, lowering it by 2,000 MT to 82,000 MT (up by one percent from the 2011 actual), and also lowered year ending stocks, down by 2,000 MT from the year beginning to 17,000 MT (unchanged from the 2011 year ending level).

With the above shortfalls, Post estimates that Japan would still need to import approximately 12,000 MT of butter this year. GOJ has made a series of announcements to commit the JFY 2012 dairy current access per the below list, which included total 7,459 MT of frozen butter imports. This is in addition to Japan’s total butter imports of 14,026 MT made last year with the majority being the current access butter (Table 8-A and 8-B). Even then, in order to meet the projected demand, GOJ may still have to make some additional butter imports (up to 4,000 MT estimated by Post) in excess of the current access at some points this year.

Feb. 2012 – Butter: 4,000 MT
Feb. 2012 – Edible Whey: 3,000 MT (Partial committed out of total 4,500 MT of the edible whey access)
May 2012 – Dairy Spread: 800 MT
May 2012 – Butter Oil: 300 MT
May 2012 – Butter: 3,459 MT

(Please note that by the end of May, GOJ fully committed the JFY 2012 dairy current access and only 1,500 MT of edible whey is left to fill its commitment this fiscal year.)

NFDM Section

Tighter NFDM Supply Outlook Forecast for 2012

As with butter, not enough fluid milk is available for the domestic production of NFDM this year (Table 4). First quarter production was five percent lower when compared to the same period last year.

Therefore, it is uncertain if Japan will be able to raise national NFDM outputs to the previously projected level of 150,000 MT (up 10 percent from the 2011 actual) this year. However, unlike butter, the current situation does not yet seem to require additional NFDM imports by GOJ.

Japan’s 2012 demand for ingredients for edible-use NFDM is projected to remain unchanged from the previous forecast at 160,000 MT (up two percent from 2011 actual). Post has only changed feed use NFDM imports, up by 2,000 MT to 25,000 MT, to reflect the recovery in Japan’s overall livestock sector (up 14 percent from the 2011 actual). This makes Japan’s 2012 combined total NFDM utilization and demand to be 185,000 MT (up four percent from the 2011 actual). At this time, use of NFDM has been low for processed milk (drinking milk category), but high for yogurt (fermented milk category) and milk beverages to meet solid demands for these products. Stocks are projected to decline to 37,000 MT by the year’s end, down 12 percent from the year’s beginning. GOJ may need to import additional NFDM (potentially a couple of thousands MT), within one to two years to replenish low monthly stocks.

Cheese Section:

Japan’s Cheese Market to Sustain Modest Growth in 2012

Post revised its previous growth projections for Japan’s 2012 cheese supply and demand further upward, reflecting a stronger market. Post raised its import projection by 10,000 MT to 225,000 MT (up five percent from 2011 actual). Post left domestic cheese production unchanged at 50,000 MT (up two percent from 2011 actual). Likewise, Japan’s 2012 total cheese consumption estimate is raised to 275,000 MT, up four percent from the last year. Posts made these revisions based on first quarter imports which, supported by solid household and food service demand (Table 9-A and 9-B), were up 12 percent when compared to last year.

Additionally, Post has revised its import projections, given falling world market prices for cheese due to an improved EU and Oceania supply situation combined with weakening Euro and Oceania currencies against the Japanese Yen.

U.S. cheese is expected to sustain its presence in the highly competitive Japanese cheese market, and is projected to grow by 12 percent in 2012 to 24,000 MT, easily surpassing last year’s record high imports. This increase is supported by the strong demand of the Japanese food industry, as well as successful marketing by USDEC.

2011 Japan Fluid Milk, Butter, NFDM and Cheese Market Situation Summary (Updated)

Japan’s 2011 national fluid milk outputs were down three percent to 7.474 million MT, mirroring a similar decline in the number of cows in milk at the beginning of the year (805,000 heads, down three percent). Fluid milk allocated for drinking use was down two percent at 4.058 million MT, as well as for processing use, down by four percent at 3.351 million MT. Regionally, Hokkaido’s total outputs were down one percent at 3.876 million MT, accounting for 52 percent of the national total. Combined outputs of other regions, including the earthquake stricken Tohoku and Kanto regions, were also down six percent to 3.598 million MT over the previous year.

In 2011, Hokkaido fluid milk was diverted to earthquake-effected regions suffering from a temporary supply deficit of fluid milk for drinking use. Consequently, this made fluid milk available for processing in Hokkaido scarce, especially for butter and NFDM production. Of the total 3.351 million MT of fluid milk in 2011 allocated for processing use, 1.204 million MT (Equivalent to 111,681 MT of cream output) of fluid milk was used for cream production, up four percent from the previous year. For domestic natural cheese production, 0.492 million MT of fluid milk (Equivalent of 49,000 MT of cheese output) was diverted, a two percent rise.

For JFY 2011, GOJ set a quota of 1.85 million MT for its fluid milk subsidy program for processing use. However the quota was underutilized by 12 – 13 percent due to a lack of fluid milk, which significantly lowered Japan’s 2011 domestic outputs of butter (63,000 MT, down 15 percent) and NFDM (137,000 MT, down 12 percent). GOJ imported 14,026 MT of butter mostly through its JFY 2011 dairy current access to alleviate the butter shortage. The United States accounted 36 percent of Japan’s total 2011 butter imports, followed by New Zealand (35 percent) and the Netherlands (15 percent).

Japan’s 2011 market demand for cheese rose by seven percent from the previous year to an estimated 264,000 MT. Total imports also rose by eight percent to 215,256 MT with Oceania cheeses (Australia, up six percent, New Zealand, up 26 percent) accounting for 66 percent of the total. 2011 was a remarkable year for American cheeses. The United States was the third largest supplier to Japan, renewing its 2010 record, with imports surging 57 percent to 21,424 MT. Imports from the United States were supported by its competitive offer prices (partly due to a strong yen) and adequate supplies to meet the strong demand for shredding. Imports from EU countries, mainly for cheeses for direct consumption, generally stagnated due to high prices.

June 2012

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