Instead, they will be prepared for the ups and downs of market prices as the government, their dominant supplier, will allow them to buy imported wheat at prices closer to market levels and relax a trading scheme for some wheat types.
�From now on, users themselves should decide whether to buy in advance or not, depending on the price outlook,� said an executive at a Japanese milling firm who declined to be named. �The industry�s normalisation has just begun,� he said.
Under the existing system, in place since 1952, the farm ministry controls bulk imports of wheat and curbs non-official small-lot imports by imposing high tariffs. Imports account for 85 percent of Japan�s total wheat consumption.
The ministry then sells the wheat to domestic users, such as millers, at higher prices that are fixed once a year.
The ministry initially aims to avoid disrupting supplies of the key grain partly by using the difference between the purchase and sales prices to help subsidise local farmers.
But the state-controlled system, through which Japan imports some 5.2 million tonnes of milling wheat a year, has been criticised as too rigid and costly for users as competition heats up against imports of flour products such as pasta.
Starting from this fiscal year, the ministry will revise prices of the major wheat types, or 90 percent of total imports, after six months, based on its purchase prices between December and July.
Price changes: Millers will now have to decide whether to buy in advance before second-half prices take effect in October, industry sources said.
The April-September prices for wheat from the top three exporters the United States, Canada and Australia � have been set 1.3 percent higher on average than in fiscal 2006/07 given a rally in wheat prices in Chicago last year.
It is the first time in more than two decades that millers have had to pay more to the government than a year earlier.
Later this year, the government will include container-based wheat imports by introducing a new tender scheme on such imports within state-controlled trading.
The scheme allows millers to negotiate directly with trading firms and decide the grain�s origin, price and quantity before together placing a bid to the government.
In fact, the move is a blessing for milling firms which now pay heavy tariffs to import French wheat in small lots to meet bakers� demand to make high-quality bread.
Japan imported 3,000 tonnes of French wheat last year.
�The best thing we get from the changes is that imports of French wheat in containers, the way we do now, will cost significantly less,� said Hiroaki Ishii, a manager at operating section of flour milling department at Showa Sangyo Co Ltd, Japan�s third-biggest miller.
A few trading firms have plans to increase container-based imports from France as small to medium-sized millers show strong interest in using French wheat. �It�s worth trying,� said Toshimi Uejima, managing director at Okumoto Flour Milling Co Ltd Osaka-based Okumoto has so far imported a small amount of French flour.
Currently, wheat imports in lots smaller than a 20,000-tonne ship are subject to a tariff of 55,000 yen ($470) a tonne about twice the current market price of the wheat. An extra 90,000 yen a tonne is required for imports of wheat flour from any origin. By contrast, imported wheat products such as pasta and bread are subject to a tariff of only 20 percent.
Durum and prime hard: The new flexible tender will also be applied later this year to bulk imports of durum used for pasta and Australian prime hard wheat used in Chinese noodles. Some users who can import other grains, such as soybeans, in the same vessel would benefit from a fall in freight costs.
But given current high market prices, some other millers may prefer seeking alternatives, such as pasta instead of durum, or dark northern spring from the United States whose quality is similar to Australia�s prime hard, industry sources said.
�Millers will be cost-conscious in particular for durum and prime hard wheat now that these are directly affected by international grain prices, freight rates and currency levels,� said an official at a Japanese general trading firm. reuters
