The sales of rice harvested in fiscal 2012 are now in its final stage, without marking a decline in prices as some had feared. The Ministry of Agriculture, Forestry and Fisheries’ relative price for 60 kilograms of brown rice is at a level of around 16,500 yen, 1,300 yen up from last year. Compared with the nightmare of fiscal 2010, when rice prices plummeted to around 12,000 yen, this year’s prices are about 3,800 yen higher, which is about the same level as 10 years ago. Some buyers complain about the recent price increases, but the prices have only increased to the level a little higher than that before the slump. From the standpoint of rice producers, the current price level is not high enough to stabilize their businesses.
The biggest factor which affects rice prices is the crop conditions. In 1993, when the cold weather caused a serious damage to rice crops and the rice-crop index was as low as 74, rice bidding was suspended and rice prices skyrocketed to mark prices as high as 30,000 yen in the end. Rice prices also increased in 2003 when the rice-crop index was 90, up 5,000 yen from the year before. In the recent six years, however, the rice-crop index is at the level of 98 to 102, which is about the average, and even when prices declined sharply in 2010, the supply-demand balance stayed relatively stable.
The next important factor is the conditions of the economy. In 1997, when the Japanese economy was hit by the triple crisis (the Asian currency crisis, the domestic financial crisis and the consumption tax hike), the rice prices marked a sharp decline, down 2,100 yen from the previous year. The domestic economy was hit even harder by the worldwide financial crisis of 2008 brought about by the Lehman Brothers’ collapse. Retailers were also hit hard by the recession, with supermarkets’ sales marking a year-on-year drop in 2009. Sales of packed lunches and fast food in convenience stores also decreased.
In order to recover sales, supermarkets, convenience stores and restaurants all introduced the price reduction strategy. It was in 2009 that a 298-yen packed lunch became a big hit in supermarkets. The rice harvested in fiscal 2010 was affected by this trend, with rice producers and wholesalers pressured to cut prices. The individual household income support system, which was introduced this year, also accelerated price cuts, as distributors claimed that rice producers will not be damaged by the price cuts because they are compensated for the losses.
Rice prices recovered in the two years after the sharp decline in 2010, but there are aftereffects. Retail prices of rice sold to consumers are linked with prices at producing areas, but it is difficult to raise the prices of rice for business use, such as rice used for lunches sold at convenience stores and restaurants. Two years ago, the wholesale price of white rice for business use was less than 300 yen per kilogram. Rice could be marketed at such a low price because the relative price of brown rice was less than 15,000 yen at that time. Currently, it is impossible to procure rice at such a price, so manufacturers of packed lunches and other food products are forced into a tight corner because their customers – supermarkets and convenience stores – will not accept higher prices.
Another threat is imported rice. The prices of foreign white rice bought through the SBS (simultaneous buy-and-sell) system were around 240 yen per kilogram until 2009, but went below 200 yen in 2010, and began to be widely used mainly in restaurants. When the price gap between domestic rice and foreign rice widened in 2011, some supermarkets began using foreign rice as well. People’s image for foreign rice improved and they became less reluctant to use imported rice, so in 2012, bid for foreign rice was successful even at a price as high as 300 yen. The price gap between domestic rice and imported rice became as small as 20 yen, but this did not become a disadvantage for foreign rice.
It is difficult for food companies, supermarkets, convenience stores and restaurants, which have become accustomed to using low-price rice, to accept price hikes. Considering that such aftereffects remain, we cannot be optimistic about the prospects of rice prices. We strongly call for the stabilization of the rice market.
(April 10, 2013)