Japan's hard red spring wheat purchases have increased by 235,000 metric tons, to 1,304,870 MT, in FY2005. Additional imports of HRS are estimated at 200,000 MT, according to the U.S. Wheat Associates.

Japan's government wheat buying agency announced last December that they lowered the price of U.S. wheat that they re-sell to Japanese flour millers, while keeping Canadian and Australian wheat prices at their current levels. The price change makes several U.S. wheat classes more competitive in the Japanese market.

Under Japanese agricultural policy, the Ministry of Agriculture, Forestry and Fisheries operates as an importing state trading entity for wheat and other commodities. The agency then resells the wheat to millers at prices that are above world market prices and uses the proceeds to support domestic agricultural programs.

Over the years, U.S. Wheat Associates has urged the Japanese government to reduce government resale prices so that Japan's strong and vibrant milling industry will be better able to compete against imported flour mixes and other finished products.

Mr. Takeo Suzuki, USW's country director in Japan, reports that MAFF discounted the prices at which they resell imported U.S. wheat to Japanese flour millers by 0.35% on average, with different adjustments for different wheat classes. The price for U.S. western white wheat was reduced by 0.84%, U.S. hard red winter (11.5 protein) by 0.35% and U.S. dark northern spring wheat (14.0 protein) by 0.67%. In real terms, the U.S. HRS resale price was reduced about $2.90/metric ton.

"Due to the competitive resale price and the limited supply of the Canadian counterpart wheat, U.S. HRS has steadily gained favor, with sales increasing by 22% in FY 2005," Mr. Suzuki points out.