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Commodities

Japan's cold storage in short supply as meat imports rise

Pork shipments rise after tariff cuts, with buildups to last through Olympics

A man works inside a cold storage warehouse at Toyosu Fish Market in Tokyo.   © Reuters

TOKYO -- Japan's food importers are running out of space at temperature-controlled warehouses in Tokyo and beyond, as the cold storage sites increasingly are stuffed by the country's growing shipments of pork and beef.

Food storage at refrigerated facilities in Tokyo reached 555,000 tons at the end of September, up about 20% over two years, the Japan Association of Refrigerated Warehouses says.

The problem emerged after free trade deals such as the 11-nation Trans-Pacific Partnership and Japan's economic partnership agreement with the European Union took effect, lowering duties on pork, beef and other products.

Imports of animal and dairy products rose after the tariff cuts, the association's chairman said. These products accounted for more than 40% of the total storage, up a little over 10 percentage points from a year earlier.

"Even if warehouses in Tokyo and Kanagawa [Prefecture] were full, we used to be able to find spaces somewhere else," said an import official at a food company. "But now, we can't find them anywhere in the country."

The dearth of availability began in mid-August, the official said, and the duration has been unprecedented.

The storage shortage also results partly from the Chinese outbreak of African swine fever, which shrank that country's herd to 300 million pigs as of September -- down by about 120 million over a year. Afraid that a surge in Chinese demand for imports would raise prices, Japanese companies rushed to snap up European pork, said an executive at meat trading house Starzen.

Japan's pork imports rose 4.6% on the year between January and October, along with a 1.3% increase for beef, trade statistics show.

Wholesale prices dipped, and frozen U.S. beef cuts of short plate -- used for beef bowls and shabu-shabu hot pot dishes -- now trade at 625 yen ($5.70) per kilogram, about 17% cheaper than a year ago.

But the trend appears to be reversing.

"Australian beef prices are starting to surge, and this is starting to lift American beef prices slightly as well," said the head of beef operations at Sojitz Foods. The deadly hog disease in China is expected to spread next year, but "even if we want to increase imports, we are facing the hurdle of finding storage," he said.

A physical lack of new facilities also contributes to the shortage. Animal products are subject to quarantine at the time of arrival and require storage near bays and ports, where related facilities are located. But these are precisely the areas that lack available land.

Given that the meat demand is unlikely to remain high in the long term, construction of new cold storage warehouses is limited. This contrasts with the boom in building general logistics facilities in greater Tokyo amid the rapid growth of online retail.

Import costs also are rising in some cases, as a container left in a terminal generates demurrage. "Even if we can buy products at lower prices, extra costs get added," said an official at a trading company.

More inventory buildups are expected soon for food that likely will see strong demand among visitors next summer when Japan hosts the 2020 Olympics.

"Until at least the Olympics are over, we'll keep having difficulty finding storage space," an industry insider said.

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