Boston, MA -- (SBWIRE) -- 06/27/2013 -- We hold a cautious outlook on Japan's agribusiness sector. The main marker which will give more cues about the direction of the agriculture industry will be in the outcome of the negotiations about joining in the 11-nation Trans-Pacific Partnership free trade talks. In the near term, the latest lift of a ban on beef imports from the US should lead to a considerable shift in import patterns (from relying mainly on Australian beef to US-origin beef) and also lift overall imports on a whole.

Key Forecasts

- Rice production growth to 2016/17: -0.8% to 8.5mn tonnes. The government has encouraged a reduction in the acreage planted to rice to reduce oversupply problems; however, this policy has often been unpopular with farmers. For example, the Ministry of Agriculture, Forestry and Fisheries plans to set prefecture-specific rice production targets based on demand. These targets will be linked to government grants under the income compensation programme for farmers.
- Beef consumption growth to 2017: 1.8% to 1.3mn tonnes. Production will grow marginally as consumers on tight budgets prefer cheaper poultry meat and pork to beef.
- Soybean consumption growth to 2017: 7.0% to 3.2mn tonnes. Soybean consumption hinges mainly on beef consumption. Thus, given the increment expected in beef consumption, soybean consumption should increase in tandem.
- 2013 real GDP growth: 1.4% (up from -1.9% in 2012, forecast to average 1.3% out to 2017).
- 2013 consumer price inflation: 0.0% average (same as in 2012, forecast to average 1.0% to 2017).
- BMI universe agribusiness market value: US$111.7bn in 2013 (down from US$113.8bn in 2012; forecast to decline annually by 0.5% on average to 2017)

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Key Revisions To Forecasts

Our 2012/13 wheat consumption forecast has increased, to 6.8mn tonnes from 6.5mn tonnes. This is due to the trend of substituting corn for wheat as an ingredient in producing compound feed. Indeed, wheat's composition in compound feed has grown from 0% in 2002 to 4% in 2012, corresponding with a fall in corn composition from 49% to 42% over the same period.

Industry Outlook

Japan's high trade barrier aimed at protecting its rice industry has been a long-standing issue of contention that has prevented the country from being permitted to fully participate in the 11-nation Trans Pacific Partnership (TPP) Talks, which include the US, Canada, Mexico, Chile, Peru, Singapore, Vietnam, Malaysia, Brunei, Australia and New Zealand. According to industry sources, Japanese officials have been awaiting reassurance from the US that such sensitive industries will be shielded from full free trade agreements.

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