Next year, the government, which now acts as the sole middleman for both Japanese farmers and foreign suppliers, plans to relax its control over the wheat market.

The move is in response to strong calls from the feed industry, which has shouldered high domestic prices for wheat amid a decline in the size of Japanese livestock herds.

"We must get cheap raw materials to reduce costs," said Ikuo Ishida, general manager of Nippon Formula Feed Manufacturing Co Ltd, a medium-scale animal feed producer.

"Circumstances surrounding the Japanese feed industry are far from favourable," he added.

Official data shows the number of cattle producers in Japan fell to 1,42,000 in 1997 compared with 221,100 in 1991, while imports of cheap beef in 1997 surged to 647,311 tonnes, up 66.8 per cent from 3,88,000 tonnes in1991.

In line with this decline, Japanese demand for compound feed fell to 24.76 million tonnes in 1997 from 25.86 million tonnes in 1991.

Industry officials say pressure on the Japanese livestock and feed industries will increase as the government will have to reduce import tariffs for beef imports early next century in line with international agreements.

Currently, the Food Agency buys all domestic wheat for high official prices and sells it to flour mills and feed makers at prices which are below official purchasing prices but still well above international prices.On the other hand, it imports wheat for international prices and sells it at the higher official domestic prices.

As a first step, the Food Agency is considering introducing a simultaneous buy and sell system (SBS) for feed wheat, selling foreign wheat to domestic users at the same time as it buys wheat from overseas.

The system, already used for rice imports, should allow feed producers to import raw materials in a more flexible way, aFood Agency official said.Hiroyuki Matsumoto of the National Federation of agricultural Co-operative Associations said the only way for domestic livestock farmers to survive was to cut costs while producing high-quality beef for which there is some demand in Japan.

Sirloin beef from the United States sells in Japanese shops for around 1,800 yen or about $13 per kg, which is about $6 per lb. Australian sirloin sells for 1,300 yen.

Japanese beef ranges in price from 2,000 to 7,000 yen, with the famed Kobe beef at the high end of that range.

Meanwhile, the Food Agency plans to allow Japanese flour mills to buy wheat directly from domestic farmers to encourage farmers to produce what the market really wants.

Over the past 10 years, the share of domestic farmers in Japan's annual wheat consumption of about six million tonnes has shrunk. Last year it was seven per cent, against more than 10 per cent in 1987.

"If the relaxation of the wheat policy works well, Japan's self-sufficiency rate in wheat mayrecover," said an official of the agriculture ministry.

Low profitability in producing wheat in Japan mainly caused the decline in the share of domestic wheat production.

Meanwhile, Coffee movements are picking up in Indonesia's key Sumatra growing areas but they are hampered by sluggish bank operations, traders said in Bandar Lampung.

"Money flow directs coffee flow and banking activity is slow to pick up speed," said one trader. The removal of Suharto and the appointment by replacement Jusuf Habibie of a "reform and development" cabinet had eased the political and social tension.

But what commodity traders need above all is for the financial system to stabilise and credit to start flowing again.

Traders estimated about 500 tonnes of robusta coffee a day is now arriving in Bandar Lampung from upcountry as delayed harvesting gets under way. Arrivals are expected to reach a peak of up to 2,000 tonnes per day by the second half of June or first half July. Shipments are leaving the Port and emptycontainers are available, though there could be a problem later as coffee movement increases on a faster pace of harvesting.

"There is still some feeling of insecurity moving coffee down from upcountry, but it is really now a money issue more than anything else," said a trader.