How much money do rice farmers need to make from farming?

March 30th, 2012 by Philip Brasor & Masako Tsubuku

Bags of rice for sale in a JA retail outlet

The Trans-Pacific Partnership trade agreement, which Japan endeavors to join, continues to be controversial, though most people in Japan only have knowledge about the broadest arguments. If Japan joins TPP, it’s the end of Japanese agriculture; if it doesn’t, Japan will not have access to one of the biggest markets in the world.

Several recent articles in the Asahi Shimbun at least give some idea of what rice farmers stand to lose or gain from the agreement. Two farmers are profiled, one in Fukui Prefecture, the other in Aomori prefecture. The Fukui farmer works a one-hectare paddy that he inherited from his father about 15 years ago. The paddy yields about 96 hyo (1 hyo = 60 kg) a year and ¥1.47 million in revenues, which breaks down to ¥1.1 in sales and the rest in government subsidies. When the Democratic Party of Japan became the ruling party, it threw out the old Liberal Democratic Party subsidy system, which basically discouraged farmers from growing rice. The DPJ subsidy, called kobetsu shotoku hosho (individual income compensation), pays them to grow by making up for any losses they might incur due to low market prices.

The Fukui farmer’s annual expenses for cultivating his paddy run to about ¥1.77 million, which includes ¥520,000 for outside labor. It’s implied that the paddy owner himself does very little actual farming. On his tax return he also lists in the loss column ¥600,000 in depreciation for his farm equipment. All in all, the farm in 2010 lost ¥300,000. However, he says it doesn’t really bother him. His main job is working for an electrical parts maker, which pays him a salary of ¥5.3 million. His wife also works, earning ¥2.8 million.

After subtracting rice that he will use for his own consumption, he sells half of the remainder to friends for ¥18,000 per hyo. The rest goes to JA (Japan Agriculture), the union of agricultural cooperatives, which buys it for ¥12,000 per hyo, or ¥200 per kg. There are two reason why he continues rice farming even though he doesn’t make a profit. One is that he wants to keep the land, and the other is that he prefers eating rice he grows himself. He told the Asahi that he doesn’t like TPP, but is resigned to accepting it. “If you don’t grow rice, the land deteriorates, and that bothers other farmers in the area,” he says.

The other farmer profiled, the one in Aomori, does make a profit, simply because the size of his land is bigger: 5 hectares. This farmer is a public servant whose job pays an annual salary of ¥5 million. In his case, the land has been in his family since his grandfather. He works the land himself with his wife and mother, mainly on weekends and holidays. He sells the rice he grows for a little less than ¥6 million, and receives a subsidy of ¥1 million. After expenses and depreciation, he’s left with ¥1.7 million.

Both of the farmers are technically part-timers, since they make the bulk of their income with non-agricultural jobs. There are 1.63 million farmers in Japan who sell their produce, and 80 percent are part-timers. The average income of farmers who grow only rice was ¥4.41 million in 2010, and about 90 percent of that income is from non-agricultural sources, including pensions. What’s important to remember is that the government now spends ¥560 billion a year on farm subsidies. Without those subsidies, the average rice farmer would record a loss from agricultural activities, but it doesn’t mean he’d be financially in the red, since most have income from other sources. As it stands, rice is the most inefficient crop in Japan, mainly because most farmers only cultivate small plots of land. Almost all the agricultural subsidies paid in Japan last year went to rice farmers.

As far as what these farmers may face if Japan joins TPP, the U.S. brand Calrose, which is now subject to high tariffs, costs about ¥2,000 for 5 kg through internet sales, which is a little more than the price of regular Japan rice (¥1,800) but quite a bit less than premium organic Japanese rice (¥3,400). Calrose, it should be noted, has become very popular since the Fukushima nuclear accident for obvious reasons. According to the Asahi article, if the rice tariff is eliminated, it is estimated that 4 million tons of foreign rice will be imported, or about half Japan’s yearly consumption, and the wholesale price will drop to about ¥83 per kg for Calrose and ¥116 per kg for California koshihikari, which everyone says is pretty tasty.

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4 Responses

  1. The major problem with Japanese agriculture, one that almost no government over the last 30 years or so has bothered to address, is scale. Farming of all sorts in Japan could be at least a break even proposition or even profitable if there were fewer farmers yet and if it were to go larger scale in those areas where this is still possible. The farmer in Aomori is something of an example of this, though 5 hectares still isn’t much of a farm even if devoted to a single crop.

    To my knowledge, Japanese agriculture, be it rice, vegetables or fruits, is still categorized as “intensive gardening.” As long as rice in particular is approached as if you were raising orchids (hand or mechanically planting sprouts), no one can expect domestically grown rice to be competitive.

    A certain portion of the population will always prefer buying domestically grown rice and you’d maintain this customer base or even expand it if the price for Japanese rice was 10-20% lower than it is now, which is potentially profitable with large farms.

    Premium short and medium grain “Japanese-style” rice grown and sold in the U.S. commands a higher price (Calrose is very much a lower tier brand) just as the best locally grown rice in Japan would continue to be profitable without subsidies or tariff barriers to imported rice, much of which, Jasmine rice for one, doesn’t compete with Japanese rice in the traditional Japanese diet.

  2. Great article. Nice to see a clearer view of the issue wothout all the hype, and no mention of differences in length of intestines between Japanese and foreigners. I agree with the first response – rice is so important to most Japanese that I think many will be willing to pay the premium to buy locally grown product. It is a bit silly that pasta is so cheap, and rice so expensive….

  3. The postwar communist-style “Land reform” pushed by New Dealers of the FDR administration broke up farms into tiny plots of land and subsequent agricultural laws made it almost impossible for a non-farmer to purchase farm land. Perhaps the only way for anyone to become a farmer in Japan is to inherit farmland from farmer parents or marry into a farm family. The legacy of stupid “Land reform” has resulted in a nation that has high quality agricultural products but they are sold for ridiculously high prices.

    Before the Japanese agricultural market can be opened to the rest of the world, it must first be opened to the Japanese people so that people who actually want to farm can do so without being impeded by farm laws that are designed to only maintain the status quo of JA and current farmers.

  4. I keep wondering about the Fukui farmer’s annual expenses and his sales revenue. Especially as he claims 600,000 Yen in depreciation for his farm equipment for one year, while his sales amount to 1.1 million Yen. That does not look like a healthy relation between the expenses for equipment and the output in rice production.

    But maybe this is because he is a part-time farmer, and thus has his own equipment for his small rice field? I have often observed farmers working on their fields at weekends, so it seems that they are part-timers who have no time to do agriculture during the week. Because there are so many part-timers, they all have to do it on the weekend, and thus have to own all of the necessary equipment. Lots of investment! Kubota, Yanmar and other manufacturers may be happy, but the price goes up.

    I think the size of a farm is not so relevant, rather the huge amount of underused machines in Japanese agriculture. If small farmers would share the machines, costs would come down. But then of course not all of them could work on the fields on weekends only…

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