Highest wheat price rise in 14 years has Japan consumers bracing for more expensive bread

Japanese consumers are bracing for possible price hikes on bread and wheat products in the coming months as the government’s selling price for imported wheat was set to rise 17.3% beginning Friday.

The increase in the price for wheat the government sells to private milling companies is the highest in nearly 14 years and 50% higher than 2020. It comes amid growing concerns about poor harvests in the countries that supply wheat to Japan and the effect of Russia’s invasion of Ukraine, which together account for 29% of the world’s wheat exports, on commodity prices and availability worldwide.

The wheat purchase price is determined every six months by the agriculture ministry. Since September, the last time the purchase price was set, the U.S. and Canada have seen a poor wheat crop yield following the hot, dry summers in 2021. A weakening yen and supply disruptions due to export restrictions on Russia due to the war have also led to higher wheat prices worldwide.

According to the agriculture ministry, domestic demand for wheat between 2016-2020 amounted to about 5.6 million tons annually on average. About 90%, 4.88 million tons, came from abroad, including 2.43 million tons from the U.S. (46.9%), 1.63 million tons from Canada (36.5 %), and 820,000 tons from Australia (16.2%). The rest comes mostly from domestic sources. Virtually none comes from Russia or Ukraine, but the loss of exports from those two countries could have a severe knock-on effect for Japan.

Five varieties are the target of the purchase price hike. They include three American varieties: Dark Northern Spring, Hard Red Winter, and Western White, the Western Red Spring variety from Canada and Standard White from Australia.

Dark Northern Spring is used in commercially produced bread, Chinese noodles, and gyōza (fried dumplings), as is Hard Red Winter. Western White is used for flour for confectioneries and for tempura flour. Western Red Spring is used by breadmakers, while Standard White is used for udon (thick noodles).

The average price of the above five varieties will be raised to ¥72,530 per ton during the April-September period. That’s the second-highest level since 2007, when the price rose to ¥76,030 per ton from the six month period after October 2008, amid a worldwide rise in commodity prices. The government’s purchase price for September 2021 to the end of March had been ¥61,820 yen per ton.

The wheat price for the six month period beginning in September 2021 increased by 19% and the result has been a rise in prices for bread. In February, a loaf of bread was 7% more expensive compared to the same time last year. The agriculture ministry estimates that the price of cake flour will go up by 4.4% and bread will see another 1.5% price rise due to the April wheat hike.