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Commodities

Aussie beef grows pricier in Japan despite tariff cut

TOKYO -- The price of Australian beef has risen in Japan, even after the import tariff was reduced under a bilateral trade pact that took effect a year ago.

     Higher prices in the Australian market more than offset the lower levies. Import volume has risen only slightly, while cheese and wine imports jumped on the lower prices.

     Japan imported 267,000 tons of Australian beef in January-November 2015, up just 2% on the year. The 38.5% Japanese tariff dropped to 28.5% for frozen meat and to 31.5% for chilled meat. Imports jumped in April, when the levy fell at the start of the new fiscal year. But a sharp rise in prices thereafter in the Australian market put on the brakes, and Japanese meat dealers curbed imports out of concern over setting off a safeguard mechanism, which blocks a surge in imports.

     In Australia, beef from young cattle up to 18 weeks old sells for about 6 Australian dollars ($4.21) per kilogram, up 31% from a year ago. Past droughts have reduced the supply of feed hay, and excessive front-loading of beef shipments took a toll.

     That country's currency has softened from about 100 yen per Australian dollar in late 2014 to 82 yen in December 2015, but this was not enough to lower the import price.

     "With overseas food markets unstable, tariff cuts do not necessarily lower import prices," said Akio Shibata, president of the Natural Resource Research Institute.

     Some tariff cuts in the trade pact do not take effect for over 10 years, and safeguard mechanisms could block a sharp increase in imports. For now, import volumes seem dictated more by market prices in Australia.

     In Japan, the retail price of Australian beef sirloin is around 420 yen ($3.54) per 100 grams, up around 10% from a year ago. U.S. beef prices also rose nearly 10%, while Japanese beef prices have surged. Japan relies on foreign supply to cover about 60% of its beef demand, and Australia has the biggest share of the imports. "Australian beef continues to be popular," a staffer of major supermarket operator Inageya said.

     However, Japan's wine imports from Australia have increased notably under the trade pact. In the January-November period, grape wine imports jumped 41% to 12,000 kiloliters as import prices have fallen around 20% to some 360 yen per liter. Japan's tariff on the wine has dropped to 11.3% or 125 yen per liter from 15% or 125 yen per liter and will be eliminated over a period of seven years.

     Chilean wine, which has the largest import share in Japan, poses harsh competition, as traders tout its cheap prices in marketing to restaurants and retailers. But Melanie Brock, head of the Australian and New Zealand Chamber of Commerce in Japan, said Australian offerings such as the Jacob's Creek line compete in terms of brand value, too.

     Cheese imports from Australia including curd -- a semifinished product -- rose 12% year over year in January through November to 80,000 tons. Over a period of 20 years, Japan will raise the tariff-free import cap on Australian cheese to be further processed with Japanese cheese. And a 3% or so drop in import prices to around 450 yen per kilogram also helped boost the volume.

     With Russia banning food imports from the European Union in response to Western sanctions, a staffer of a trading company in Japan said that "we were able to import mainstay Oceanian products cheaply thanks to the loosening of the dairy market internationally."

(Nikkei)

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