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Japan to introduce SBS import tender for food wheat

Reuters, TOKYO, Feb 10, 2006 - Japan plans to introduce the simultaneous buy and sell (SBS) system for import tenders of milling wheat next year, opening the way for exporters other than Australia, Canada and the United States to enter the market, the Japanese government said Friday.

Japan has maintained a state-controlled trading system for key grains such as wheat and rice, and has bought the grains via import tenders conducted by the Agriculture Ministry.

Japan has so far imported milling wheat exclusively from major exporters in Australia, Canada and the United States to secure a large quantity of wheat of high quality.

But the introduction of an SBS system will open the way for Japanese flour millers to designate the origin, price and quality of grain sought.

To introduce the system, the government will propose a revision to Japan's food law during the current parliament session, an official at the Agriculture Ministry said.

“If the revision is approved by parliament, we will introduce the system in the fiscal year beginning in April next year," he said.

At the beginning, the ministry is considering introducing the SBS system for a small portion of the milling wheat it buys via import tenders, he said.

The ministry may buy about 200,000 tonnes of durum wheat via SBS import tenders in the first year, and could expand the volume in the future, he added.

OTHER SOURCES

In recent years, Japan has bought durum -- wheat used mainly to produce pasta -- only from Canada. But under the SBS system, Japanese end-users and trading firms might source durum from elsewhere such as the United States and Europe, he said.

In the fiscal year that ended last March, the ministry bought 196,000 tonnes of durum from Canada.     In the same period, the ministry bought a total of 4.98 million tonnes of milling wheat via weekly import tenders.

 Of the total, it bought 2.76 million tonnes from the United States, 1.09 million tonnes from Canada and the rest from Australia.

Traders and industry officials said on Friday that Australia, Canada and the United States would continue to be dominant wheat suppliers to Japan even after the introduction of the SBS system, as they are more competitive in terms of quality and quantity than other wheat exporters such as Argentina, France and Russia.

But there is a chance for other exporters to gain modest shares of the Japanese market if they can offer low prices for wheat of good quality, they added.

For imports of feed wheat and barley, Japan introduced the SBS system in 1999. Since then, Japan has expanded supply sources to countries beyond the three major exporters, such as China and Ukraine.

The SBS system will also put pressure on all wheat suppliers to Japan to cut prices, the officials said.

Under the current import system, Japan's Agriculture Ministry has bought milling wheat from the three major exporters, using the volume they had purchased in previous years as a reference.

But under the SBS system, the ministry will likely select suppliers based on prices, they said.  "So far the ministry has given the top priority to the stability and security of wheat supplies. But from next year, they will focus more on costs," a Japanese grain trader said.

The ministry is a target of downsizing while the government, faced with a huge fiscal deficit, is under growing pressure from lawmakers to cut spending, he added.

 ((Reporting by Aya Takada;  Messaging:
 aya.takada..com@.net; email:
 aya.takada@.com; +81-3 3432 7431))