Boston, MA -- (SBWIRE) -- 08/15/2012 -- BMI View: Japan has generally recovered well from the March 2011 earthquake, but the country's underlying long-term economic weaknesses remain and will make their impact felt across the agribusiness industries we cover. Rice production has been the sector most affected in the aftermath of the quake, with significant areas of farmland near Fukushima under a cultivation ban. Poultry facilities have been largely replenished, and poultry looks to be the strongest performer in livestock consumption at the expense of beef, which will stagnate in the face of slow economic growth. Demand for soybean will fall in line with this lower demand for beef, as well as because of high prices in world markets.

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Key Forecasts

- Soybean consumption growth to 2016: -18.8% to 2.6mn tonnes. Weak demand for beef, the main driver of soybean consumption, as well as high soybean prices (with Japan heavily dependent on imports), have led to a continued decline.
- Poultry consumption growth to 2016: +10.0% to 2.3mn tonnes. Sluggish economic growth will push Japanese households to increase their consumption of poultry at a much faster rate than beef, which is more expensive.
- Rice consumption growth to 2015/16: -7.0% to 7.6mn tonnes. Japanese consumers will continue their decades-long shift away from rice, traditionally a staple food.
- 2012 real GDP growth: +1.4% (up from -0.7% in 2011, forecast to average just under 1% out to 2016).
- 2012 consumer price inflation: 0.1% average (up from -0.2% average in 2011, forecast to average 0.7% to 2016).

Industry Developments

The most significant downward trend in our forecast is soybean consumption. We highlight that the fortunes of this commodity are closely linked to beef, with soy the most frequently used feed for Japanese cattle herds. Two factors will serve to drive down demand for soybean over our forecast period to 2016: high prices and low demand for beef. Reuters reported in May that Japanese oil processors are looking to alternatives such as palm oil, as soybean prices have rallied 14% this year and the yen is strong against the US dollar, making imports of US soy increasingly uneconomical. Yoshinori Komura, managing director of the Japan Oilseed Processors Association, said that soybean crushing in 2012 may decline more than 3% on the 2011 level to 2mn tonnes. Indeed, figures reported by Reuters showed that Japan imported 31.6% fewer soybeans in January 2012 compared with January 2011.

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