Posts Tagged ‘Ministry of Agriculture’

When protecting farmers hurts consumers — and farmers

Monday, October 27th, 2014

Sign in dairy case telling shoppers they are limited to only one package of butter per person

Sign in dairy case telling shoppers they are limited to only one package of butter per person

Butter isn’t as essential in Japanese cuisine as it is in certain other countries’ national styles of cooking, but it does have its place, most commonly in white sauces and baking, and anyone here who uses it regularly has had to pay premium prices for it. Lately, they’ve been paying even more.

In a recent Asahi Shimbun feature a housewife shopping in Minato Ward, Tokyo, is tempted to pick up a package of “luxury brand” butter because all the regular butter is sold out, but in the end she leaves the store without it because she just can’t see spending that much money. The article doesn’t say what that price is, but regular butter right now is said to cost “¥400 or more” for 200 grams, and the luxury butter is “twice as expensive.”

The implication is that ¥400 is already too much to pay, but in any case wherever you go, regular butter tends to be sold out, and many supermarkets now limit customers to only one package per trip. More significantly, businesses such as ramen restaurants and bakeries, which rely on butter as an essential ingredient, are also suffering from the price increase. That’s because there is an acute butter shortage.

And the reason there’s a butter shortage is that there’s a milk shortage and butter is the least prioritized of dairy products. Most milk that’s produced in Japan is sold as milk, and only when there is milk left over after being channeled into by-products like cheese and yogurt does butter get made. Unlike most other dairy products, butter can be frozen and stored for a long period of time.

But why is there a shortage of milk, especially since milk is fiercely protected by the government, making it one of the most contentious items on the table for the Trans-Pacific Partnership negotiations? Japanese dairy farmers insist that if the market is opened to imports of milk products they will be underpriced out of existence, but as it stands the dairy industy in Japan is dying anyway due to attrition. According to the National Federation of Agricultural Cooperative Associations (JA), Hokkaido, which contains the bulk of Japan’s dairy farmers, is seeing a shortage of labor in the dairy field, but more importantly the price of feed has gone up greatly in the last year due to the drop in value of the yen. Three-quarters of livestock feed in Japan is imported. One Hokkaido dairy farmer told the Asahi that production has dropped 10 percent since spring and he doesn’t expect it to return to “normal” since he’s already reduced the number of cows on his farm.

Dairy prices are basically controlled by the three large food manufacturers, Meiji, Snow Brand (Yukijirushi), and Morinaga, all of which have enjoyed healthy profits due to the natural price increase brought about by their own control of shipments starting last winter. The ostensible explanation for the shortage was the unusually hot summers of 2012 and 2013. In hot weather, cows are less likely to become pregnant and thus milk production decreases. But a longer view shows that milk production has been steadily declining for almost 20 years. Total milk production in 2014 is expected to be 7.32 million tons, which is 15 percent less than the amount produced in the industry’s peak year of 1996.

Technically, all the butter sold in Japan is supposed to be domestically produced, but even during so-called normal years there is never enough for demand, so food companies make up the difference by buying foreign butter, which comes with a heavy tariff. But during particularly bad years the agricultural ministry will implement “emergency imports” of butter to meet demand, and such stopgap purchases have become more frequent as the number of dairy farms decrease and production drops.

There were emergency imports in 2008, 2011 and 2012. This year, however, there have already been two emergency imports —  7,000 tons in May and 3,000 tons in September. It’s the first time there has been more than one emergency import order in a given year. For purposes of reference, 10,000 tons of butter typically fulfills demand in Japan for 1.5 months.

Consequently, the situation will continue as it is, and will probably worsen, especially for consumers, unless real structural change is implemented, and not necessarily through TPP. What’s needed is internal structural change. Recently, a joint program began in Hokkaido to transfer dairy production technology from New Zealand. Twenty years ago Japan and New Zealand produced roughly about the same amount of milk, about 8.6 million tons each. In 2013 Japan’s output was 7.45 million tons, while New Zealand’s was 20 million.

The difference, as pointed out in a different Asahi article, is that New Zealand did away with subsidies and government support, forcing dairy farmers to rationalize production methods, while Japan’s dairy industry continues to fall under the sway of the agricultural ministry, whose main priority is maintaining influence, and JA, whose importance with regard to dairy farmers is tied to the fact that JA is their exclusive source for feed. The New Zealand protocol doesn’t use feed or factory methods.

It stresses pastures, short grass that is more nutritious than grain, and “seasonal reproduction,” meaning planned pregnancies that make it easier for farmers to plan their years. One reason young people don’t want to go into dairy farming is because the Japan method is time-intensive: year round and round-the-clock. With the New Zealand  method, work stops at dusk, and in the winter both farmers and cows get to take a break.

The irony is that despite all the work Japanese dairy farmers perform, they produce less than half of the milk New Zealand  dairy farmers do, and New Zealand’s population is smaller than Japan’s. Granted, milk products don’t have the traditional traction in the Japanese diet that they do in New Zealand’s, but that is because domestic dairy products or, at least, the kind sold by the three big food companies, aren’t appealing. T

These companies, JA and the agricultural ministry, in order to protect their own interests, have kept high quality imported cheese and butter outside the reach of average consumers, and as a result the domestic dairy industry is now suffering. Farmers are quitting because they think there is no future. They assume tariffs will fall and put them out of business. It doesn’t have to happen that way, but bureaucratic and corporate myopia seems to guarantee that it will.

Lower egg prices bad for producers, worse for chickens

Monday, October 7th, 2013

Which came first?

Which came first?

Over the summer the retail price of eggs has increased anywhere from 20 to 50 percent, which is a significant change for consumers but also for people who are pushing Abenomics and its focus on reigniting inflation, since eggs have for years been seemingly been impervious to price changes. At the beginning of May, it cost about the same to buy a package of 10 eggs as it cost to buy a package of ten eggs thirty years ago. As the prime buka no yutosei (best “student” among product prices), it’s one of those constants people took for granted.

However, the sudden increase was not entirely due to serendipity or natural market forces. In fact, the price hike was engineered in a bid to maintain market stability. In 2011 the agriculture ministry implemented a subsidy to control the price of eggs. Because a sudden drop in price can have an immediate harmful effect on egg producers’ bottom lines and potentially damage the industry as a whole, the ministry automatically provides funds when the wholesale price goes below ¥159 per kilogram. These funds are used to cull egg-laying chickens in order to reduce supply and put pressure on demand, thus pushing the price back up.

According to Tokyo Shimbun, in May the price dropped below the designated line and the subsidy kicked in. Producers receive ¥150-¥200 for every chicken they kill, and the ministry estimates that from mid-May until mid-July, when the subsidy was available, about 5 million birds were culled. Not all were thrown away. Many were processed and sold as meat, for which the producers can earn an additional ¥20-¥50 per bird, an aspect that makes the system even more popular among producers since it rationalizes the process of replacing chickens.

Usually, a hen becomes productive — meaning it starts laying eggs — 150 days after birth, and remains productive for about 500 days. The dropping off point for production can vary greatly from one bird to the next, so whenever the subsidy is in effect egg producers get rid of those older chickens that are borderline productive since it is monetarily advantageous to do so under the system. Egg production is a relatively easy farming method since it is all about volume. In the past ten years the average number of chickens kept by each producer has increased from about 33,000 to more than 50,000, thus indicating the loss of small-scale farmers and the dominance of corporate egg producers.

Of course, when it’s all about volume it’s also all about controlling inventory, which is bad for chickens. Besides the horrendous factory conditions that egg-laying hens have to endure, their fate is also subject to capricious market forces, not to mention natural ones.

This summer was one of the hottest on record, and a lot of chickens died from heat stroke, so even after the subsidy system was lifted in July, the number of producing hens continued to decrease, sending the price of eggs to its highest levels ever. Moreover, one condition for receiving subsidies is that the producer not replace culled chickens for at least 60 days. According to JA, its Zenno Tamago brand, often used as the index for egg prices, was up by as much as ¥55 per kg on Sept. 27 compared to the same date in 2012. (For reference one LL-size egg is 70-76 grams, and one kg now costs about ¥225.) But chickens grow fast, so the price is expected to drop to its normal level by December’s Christmas cake season.

Home centers forcing JA to improve its game for farmers

Monday, September 10th, 2012

Komeri outlet in Sakae Town, Chiba Prefecture

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.

Continue reading about home center Komeri →

Whaling may be sunk by commercial reality

Monday, January 16th, 2012

Whale "bacon" in supermarket display case

Japan’s annual research whaling expedition is now being carried out in the Antarctic. As always, the controversy over whaling receives more coverage in the foreign press than it does in the Japanese media, which for all intents and purposes doesn’t normally pay attention unless arrests or violence is involved. However, Tokyo Shimbun last week reported on some of the commercial aspects of the issue.

According to the newspaper, in 2011 the amount of frozen whale in storage and designated for retail distribution exceeded 5,000 tons, which is almost three times the amount of frozen whale meat in storage 10 years ago. There are two sources of this meat: imports from other whale-catching countries, and the research whaling program carried out by Japan’s Institute of Cetacean Research and the company Kyodo Senpaku. The purpose of the research is to “determine growth by means of checking weight and body length” of whales that are caught and killed. Afterward, the whale meat is sold to help pay for the research, which costs about ¥6 billion a year. The Japanese government provides a subsidy of ¥1 billion, which means the meat sales have to cover the remaining ¥5 billion.

The increase in frozen inventory means that the costs aren’t being covered, and that the research project is operating in the red, though Tokyo Shimbun doesn’t say by how much. Until 2006, the amount of yearly stock kept increasing because the annual catch quota was also increasing, but ever since the Sea Shepherd Conservation Society started interfering with the Antarctic hunt the amounts caught have not increased. However, overall stocks have. At the end of 2010, they amounted to 5,300 tons, and though Kyodo Senpaku only brought back 18 percent of its planned catch last year after it cut short the hunt, as of last October stocks of whale meat had increased to 5,400 tons.

Continue reading about whaling surpluses →

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