Japan Livestock and Products Semi Annual Report 2008

By USDA Foreign Agricultural Service. Japan’s 2008 beef imports are projected down by 5% from last year to 650,000 MT, mainly due to a reduction in Australian supplies of grain fed beef. Sales of U.S. beef are forecast moderately higher but remain hamstrung by import restrictions. Japan’s total pork imports in 2008 are projected up by 2% to 1.24 million MT. The United States is likely to remain Japan’s largest foreign supplier of pork. Sales of U.S. pork are forecast up 3% to 475,000 MT.

1 April 2008

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2008 Revised Pork Market Outlook

Pork has been an obvious substitute for beef in the Japanese diet over the past five years. Pork consumption has directly benefited from Japan’s BSE-related consumption declines and import bans. It was initially thought that the return of U.S. beef in summer of 2006 would return beef consumption to previous levels and eventually lead to lower total pork consumption in Japan. However, continued import restrictions on U.S. beef and high beef prices make this unlikely in 2008.

Rising Feed Cost Hit Japanese Swine Producers

Tight world grain supplies and rising feed grain prices are dimming economic prospects for Japanese livestock producers. Japanese law makers have responded by enhancing existing subsidy schemes and have increased budgetary support for JFY 2008 but this is not likely to change the overall low, and often negative, returns to pork producers.

A modest decline in sow numbers is expected for 2008. Pork slaughter and production numbers are projected down by 1% to 1.24 million MT (or 16.15 million head).

Pork Imports Forecast Up 2%

Japanese total pork imports in 2008 are projected up by 2% to 1.24 million MT. The United States is likely to remain the largest foreign supplier.

Frozen pork, which is mainly used as an ingredient in processed meats and prepared foods, are projected slightly lower from last year. However, this is more than offset by growing chilled pork imports. A series of price increases by Japanese processed meat manufacturers on finished products last year (due to increased cost of procuring the frozen pork cuts) have reportedly slowed the sales volume. Post expects quite similar situation to prevail in 2008 for Japan’s processed meat market. Meanwhile, strict enforcement and monitoring of the complex gate price system by the Japanese Government will continue to regulate inflow of inexpensive pork cuts in 2008 (See JA 7058 for more details). U.S. exports of seasoned ground pork fall outside of the gate price system and are expected to see continued growth in 2008.

Similar to last year, affordably priced U.S. chilled pork is expected to do well against high priced domestic fresh and chilled pork, in both the retail and food service sectors. In 2007, average retail prices of imported chilled pork cuts (such as loin) were 30 – 40% less compared to domestic (Japanese) cuts. This price spread is expected to continue.

Modest Import Growth for U.S. Pork

Import growth for U.S. pork is forecast up by 3% to 475,000 MT (Generic pork cuts, up by 3% to 364,000 MT and Prepared/Processed Products, up by 4% to 111,000 MT).

Total Pork Consumption Forecast Up Slightly

Pork consumption will be slightly higher, projected up by 1% to 2.49 million MT. Steady demand for affordably priced imported chilled pork and a stalled recovery in beef consumption point to increases in imports. This will help offset a modest decrease in domestic production. Ending stocks are forecast down by 7% to 195,000 MT, due in part to the market anticipating higher prices and the tendency for business to draw on inventory.

At the projected level of pork imports, the pork import safeguard is unlikely to trigger in JFY 2008.

2007 Situation Summary

Japan’s 2007 Total Pork Consumption Grew 1%

Japanese total pork consumption in 2007 was up 1% from last year to an estimated 2.472 million MT, mainly supported by solid demand for domestic and imported chilled products in both the retail and the food service sectors. These increases more than offset a modest sales slump experienced in the processed pork market. In 2007, Japanese household consumption favored pork and chicken compared to higher-priced beef (See supplemental tables I-a, I-b).

Japan’s 2007 Total Pork Imports Up 5%

Total pork imports in 2007 reached 1.21 million MT, up 5% from a year before [Generic; up 5% to 988,000 MT (chilled cuts; up 6% at 306,000 MT, frozen cuts, up 5% at 682,000 MT), prepared/processed products, were up 5% to 222,000 MT] (See tables 7, 8, 9 and 10). In 2007, monthly import levels of frozen pork were stable. The growth of U.S., Canada and Mexican chilled pork sales more than offset reduced imports from EU countries (primarily Denmark) and Chile.

Respective import shares by country for chilled cuts were: U.S. (68%), Canada (25%), and Mexico (6%) and for frozen cuts; Denmark (31%), U.S. (21%), Canada (20%) and Chile (9%). The United States was also the number one supplier to Japan for prepared/processed pork products.

Demand for U.S. seasoned ground pork was strong due it is separate tariff treatment. Within this segment, U.S. products accounted 48% of imports by China’s 37%. According to a trade source, Chinese supplies under this product category are focused on Japan’s prepared foods market (e.g., dumplings) and do not directly compete with U.S. product, which is used for sausages.

Domestic Pork Enjoyed Solid Demand and High Market Prices in 2007

Despite some piglet losses due to disease, total domestic pork production in 2007 was roughly the same as last year at 1.25 million MT (or 16.265 million head). Domestic pork has a positive image with Japanese consumers and is heavily marketed on the basis of origin. Demand for domestic pork remained strong in 2007 and enjoyed higher wholesale and retail prices. The situation partially offset the impact of rising feed prices in 2007.