Home centers forcing JA to improve its game for farmers
The Central Union of Agricultural Cooperatives, more commonly known by the acronym JA (for Japan Agriculture), or the Japanese abbreviation Nokyo, has, in one form or another, controlled the finances and structure of the country’s farm sector since the early 1950s. That means not only does JA help keep prices high so that farmers can make a living, but provides farm families with everything they need to make that living, from loans to sales of equipment, supplies and fertilizer. It even sells insurance and does banking, under an exception granted by the central government. As with any semi-public organization that has a given field to itself, JA’s operations have become sclerotic over the years. In 2008, the agricultural ministry conducted a survey of farmers. When asked where they bought their fertilizer, 70 percent answered “JA,” but 80 percent of these farmers also answered that they were “dissatisfied” with the cooperative’s prices.
JA is famous for using a lot of middlemen in their sales channels, which invariably drives up the prices of everything they sell. In addition, various handling fees and distribution costs make the prices even higher. In a recent Asahi Shimbun article a professor at the Tokyo University of Agriculture said that with the recession and the possibility of more imports coming into the Japanese market, farmers have become extra sensitive about costs and as a result are beginning to wonder if JA is really looking after their interests properly. Some have already started leaving the cooperative.
But where to go? According to the agricultural ministry survey, only 2.5 percent of farmers were buying their fertilizer from so-called home centers in 2008, but that portion has likely gone up considerably since then. Home centers, called home improvement centers in the U.S., are large retail outlets that sell everything for the home, but mainly supplies that homeowners need for things like repairs or renovations, as well as gardening and landscaping. The Japan DIY (Do-It-Yourself) Association reports that there were 4,310 home centers in Japan in 2011, double the number that existed in 1990. The home center chain with the most outlets is Komeri, who own more than a thousand. And while home center sales have mostly been stagnant since 2005 owing to the growth of other retail models, mainly drug stores, Komeri is also growing. The chain says it plans to double its present number of stores in 10 years’ time.
Komeri’s success is built on its attention to farmers. A typical store covers more than 10,000 sq. meters of floor space, 10-20 percent of which is farming supplies. Komeri carries 60,000 separate items for full-time farmers, and at much lower prices than what JA charges. Prior to 2000, Komeri was mainly a supermarket chain with sundries and home improvement sections, but since the turn of the century it has concentrated more on farm supplies, which now account for 20 percent of the company’s annual revenue of ¥312 billion. The headquarters is in Niigata Prefecture, the heart of Japan’s rice-farming culture and the birthplace of its most prized breed, koshihikari.
As Komeri became more ambitious about attracting farmers to its stores, it started hiring professionals, including former JA employees, to act as full-time employees who visit farms to give advice. In 2002 it started issuing the AgriCard, a credit card that only professional farmers can apply for with a credit limit of ¥2 million. Cardholders can designate a single yearly payment time, usually after harvest and shipment, when the farmer is paid. It makes their work much more manageable. AgriCard now has about 50,000 members, which is about 3 percent of all the hanbai noka (commercial farmers) in Japan, who are defined as making at least ¥500,000 a year from sales of produce.
Komeri’s success has prodded other home centers and DIY retailers to broaden their appeal to include professional farmers. DCM Holdings, which runs the Homac chain, has started renting out farmland to people who want to become farmers. Even JA has started to improve its game. When the Asahi asked a JA representative about Komeri’s threat to JA’s virtual monopoly on agricultural supplies, he admitted that the cooperative has given the matter a lot of thought and said they were already working on changes, including sales of lower-priced generic agrichemicals. With 9.6 million members, JA’s dominance isn’t going to change any time soon, but it’s finally come to understand that it has to address farmers’ general dissatisfaction, and not just in terms of the prices they charge. The price of rice sold in stores through JA channels can be as much as ten times what it pays the farmer for it. Komeri can’t solve that particular problem, but their example might make full-time farmers wonder if they can get a better deal elsewhere.