20 July 2007

5 minute read

Report Highlights

Japan’s milk output in CY 2007 is projected to be at 8.05 million MT, down by 1% from last year. As in recent years, Japan’s fluid milk consumption is expected to be lackluster in 2007. Utilization of milk as a beverage is projected to be 4.57 million MT, down by 2% from last year. High international prices for dairy commodities are beginning to change the market outlook for butter and NFDM. Some Japanese dairy commodities have suddenly become price competitive with imported products. Strong demand for butter has made the supply situation tight compared to last year. This has allowed the Japanese government to manage its JFY 2007 minimum access import commitments by focusing on importing butter and dairy spreads. Japan’s total cheese imports in 2007 are projected to rise only slightly from last year’s to 210,000 MT. High EU dairy prices, cuts in export subsidies, and a high Euro give other suppliers, including the United States, better export opportunities in Japan. U.S. cheese exports should do well in 2007 and are projected to hit 6,000 MT, building on last year’s solid growth.

Note: Import figures discussed in the text are all customs clearance based. Discussions pertaining to market access (WTO or Uruguay Round Agreement minimum market access commitments) are based on the Japanese fiscal year (JFY), which starts in April and ends in March of the following year.

2007 Outlook for Fluid Milk, NFDM, Butter and Cheese

Due to a projected lower number of dairy cattle, Japan’s fluid milk production in 2007 is forecast lower. Recently published data on the number of cattle registered in Japan’s cattle identification system indicate that the number of Holstein cows fell 2.1% from the previous year to 1.575 million head as of April 2007. (Virtually all of Japan’s dairy herd is Holstein.) The data also suggest a shift has been taking place in the country’s dairy calf production in recent years from Holsteins for milking to F-1 cross bred animals for beef. Holstein dairy cattle are often freshened with Japanese Wagyu beef cattle. A 5% increase in dairy beef cattle production occurred in part due to high prices for domestic beef and trade restrictions on imported beef. Note: The National Cattle Herd Inventory data for 2007 have not yet been released.

Rising costs of feeds and fuel in recent years, caused by soaring international grain and crude oil prices, will hurt Japan’s dairy farming operations in 2007. Because of this, some marginal operations may go out of business and cows may be culled earlier.

Fluid Milk Consumption to Remain Weak in 2007

There remains a weak outlook for Japan’s overall fluid milk consumption in 2007. Japanese average household consumption of milk and milk products for the first five months of 2007 was mixed (See table 1). A 4.3% drop of the regular white milk consumption is a major reason for the decline. Competitions with other beverages such as tea drinks and vegetable and fruits juice drinks are blamed for declining consumption of regular milk. Based on Jan. – Mar. 07 data, utilization of fluid milk for drinking this year is projected down by 2% from a year before to 4.57 million MT (See table 2).

Fluid Milk Utilization for Processing in 2007 Unchanged

Based on lower national fluid milk outputs forecast in CY 2007, combined with a weak outlook for beverage milk consumption, the use of fluid milk for processing is projected to stay roughly the same level as the previous year at 3.40 million MT.

Further Information