Concerned about a lack of food self-sufficiency - in grains, feed and soybeans in particular – and prompted by short supply and soaring prices, Japan’s federal government is set to embark on a buying spree to build up stockpiles according to The Yomiuru Shimbun newspaper. With the lowest food self-sufficiency rates of the industrial world at 40 percent, Japan only produces a quarter of the soybeans needed to meet domestic demand, 13 percent of the wheat consumed and imports all feed.

Stocks of the national nutritional staple rice have always been maintained at sufficient levels because of its significance to the Japanese recent financial/economic difficulties led to grain stocks being depleted as global prices surged.

Now the food security issue is being increasingly recognized by many countries, some of which have introduced severe measures to safeguard supplies. This month, a council for future food strategy, headed by Prime Minister Yasuo Fukuda will start discussions with a view to compiling a report in March which will then be acted on by the Ministry of Agriculture, Forestry and Fisheries

The Yomiuru Shimbun newspaper reported that the plan will be to build up stocks which will last three months – including private inventory. Currently wheat reserves are sufficient for two to three months (including state storage of 1.8 months), one month for soybeans (two weeks) and two months for livestock feed (one month).

India is set to increase vegetable oils imports in coming months, especially of palm oil as its domestic oilseed production cannot cope with rising demand, Hamburg-based oilseeds analysts “Oil World” forecast. India is likely to import 5.62 million tonnes of edible oils and fats in 2007-2008 (October/September), up from 5.51 million tonnes in 2006-07, Oil World said. This was despite a forecast rise in 2007-08 Indian oils and fats production to 9.54 million tonnes from 8.87 million tonnes in 2006-07, it said.  “The country’s chronic oilseed and vegetable oil supply deficit may again aggravate in the second half of this season, primarily due to a setback in plantings and production of rapeseed, the most important crop for India’s vegetable oil production,” said Oil World. Indian farmers have planted more grain to take advantage of current high prices while dryness had also recently hampered plantings, it said.

The prices farmers received for their products jumped 3.4 percent in December for the fourth consecutive increase, the Agriculture Department said in a report released December 28. The preliminary All Farm Products Index of Prices Received by Farmers in December was 151 percent of its 1990-92 base, and 26 percent above the December 2006 index. The Crop Index is up 6.5 percent. The All Farm Index and All Crop Index are at record highs.

Producers received higher commodity prices for tomatoes, corn, soybeans, and wheat. Lower prices were received for oranges, turkeys, snap beans, and broilers. The overall index is also affected by the seasonal change based on a 3-year average mix of commodities producers sell. Increased average marketings of wheat, milk, oranges, and broilers offset decreased marketings of soybeans, cattle, corn, and grapes.

The December Index of Prices Paid for Commodities and Services, Interest, Taxes, and Farm Wage Rates (PPITW) is 162 percent of the 1990-92 average. The index is up 0.6 percent from November and 8.7 percent above December 2006 for a record high. Index increases for food grains, commercial vegetables, feed grains & hay, and oil-bearing crops, more than offset the index decreases for fruits & nuts.

The December index for oil-bearing crops is 183, up 12 percent from November and 63 percent higher than December 2006. The soybean price, at $10.40 per bushel, increased 99 cents from November and is $4.22 above December 2006.

What is the U.S. government doing to alter policy to manage rising commodity and food prices? There is not much the government can and should do relative to rising prices. But the one topic commodity traders frequently ask about is the Conservation Reserve Program (CRP) because some of those acres could increase the land pool for what is clearly a fierce acreage competition in 2008.

Government officials for now will only say that the next major “data check” is January 11, when USDA releases the Grain Stocks report and the Crop Production, Annual Summary. But as we have noted in the past, Acting USDA Secretary Chuck Conner has made it clear that it would take some major news to alter the current position of not offering some CRP participants to bolt their contracts without penalty. In fact, one government official noted that the penalty “is not all that great, especially when one looks at current commodity prices and land rental rates versus CRP payments, and the current move to multiple-year rental rate agreements.”

Another angle to monitor is any non-USDA focus on food price inflation. When White House and other top administration officials start asking questions about farm and food policy, history shows that things can happen fast. However, no such high-level questioning has occurred at this time.

The soy complex closed up on January 3. The soybean market has started 2008 by making new contracts highs. Soybean futures gained nearly 20 cents in the front months, while the July contract topped 1973’s record high. Soybean meal and soybean oil futures also made new contract highs, but soybean oil was the weaker product as the petroleum markets closed a bit lower. Though soybean futures are at record level, the market appears to be well supported and may continue its uptrend unless the corn market becomes more willing to let go of some of its acreage, the South American crops exceed expectations or demand begins to show signs of being moderated by high prices. January bean futures closed up $6.98, finishing at $459.84; March gained $6.89, closing at $465.72; and May was up $7.35, ending at $471.97. January meal increased $6.72 closing at $379.30; March was $7.16 higher, finishing at $386.47; and May meal closed up $7.16 ending at $390.77. January oil increased $11.90 to finish at $1113.32; March was up $8.38, closing at $1128.31; and May was $8.60 higher, closing at $1140.66.

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