Japan to Boost Rice Production as Alternative to Corn, Wheat

By Aya Takada

July 23 (Bloomberg) -- Japan, the world's largest grain importer, plans to boost production of rice for feed and flour, as part of a strategy to reduce corn and wheat imports.

The country wants to become less dependent on overseas grain supplies to protect it from soaring international prices and ensure long-term security of supply, Yuji Sawa, vice minister of Agriculture, Forestry and Fisheries, said in an interview.

Japan, self-sufficient in rice, imports more than 60 percent of its food requirements, the highest level among developed countries. Reduced overseas purchases of corn and wheat may help damp prices for the grains, which soared to records on rising global demand for food and biofuels. The increases spurred food inflation and caused riots in developing countries.

``Rice holds the key to self-sufficiency as the grain is the best crop to grow under the country's natural conditions,'' said Nobukazu Taniguchi, professor for agricultural and resource economics at the University of Tokyo.

Corn climbed 82 percent in the past year on the Chicago Board of Trade and reached a record $7.9925 a bushel on June 27. Wheat gained 29 percent in the past year, reaching an all-time high of $13.495 on Feb. 27.

The area planted to feed-use rice in Japan will rise to 20,000 hectares (49,400 acres) this year from 286 hectares last year and the government aims for production of 3.5 million tons from 400,000 hectares, Sawa said, without specifying a timeframe. The government from April 1 started a payment to farmers of 25,000 yen ($233) a ton for feed-use rice, he said.

Livestock Farmers

``We are taking measures to promote use of rice for feed, as a surge in world grain prices boosted production costs for livestock farmers,'' Sawa said in an interview in Tokyo yesterday.

Government income support for farmers who produce rice for animal feed will help Japan cut feed-grain imports, Taniguchi said. Japan's total imports of feed grains including corn, sorghum and barley were 14.5 million tons last year, meeting almost all of its feed requirements. The country imports about 5 million tons of wheat for flour, meeting 90 percent of its needs.

Itochu Feed Mills Co., a subsidiary of Tokyo-based trading company Itochu Corp., is co-operating with a farmers group in northern Japan to produce high-yielding rice for feed, said spokeswoman Yuko Takeuchi.

Production Plans

The company expects to harvest about 300 tons of rice this year from 40 hectares for use in feed for chickens and hogs. Itochu Feed plans to produce 1.2 million tons of compound feed this fiscal year, 5 percent of total Japan feed output.

``As prices of corn, the biggest ingredient in compound feed, surge on growing demand from the U.S. ethanol industry, producing feed-use rice in Japan is a way for the industry to secure raw material,'' Takeuchi said. Wider use of rice in feed would require lower prices of the grain, she said.

Lawson Inc., Japan's second-largest convenience store chain, will start sales July 29 of bread made from Japanese rice flour.

``We will probably use as much as 10,000 tons of domestic rice for the bread annually,'' said Yayoi Sugihara, spokeswoman for the Tokyo-based company. Consumer interest in rice flour is growing because of rising wheat prices, she added.

Japan is developing higher-yielding rice for feed that is easier to grow than food varieties, where taste is more important, Sawa said. The country plans to sell more than 600,000 tons of foreign rice this year from its stockpiles to feed makers, up 50 percent from a year earlier, a ministry official said last month.

Japanese rice for food is the world's most expensive grain, costing 240,000 yen a ton and protected from foreign competition by a 778 percent tariff on imports.

For rice to widely replace wheat in flour, its price would need to fall to around 70,000 yen a ton, the government estimates. To become an alternative to corn in feed, it must drop to about 40,000 yen.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net