JA Group: Cultivating the Appeal of Farming

From an Old to a New Generation

Agriculture in Japan is in the midst of passing from an older to a newer generation. Nearly 65% of core farmers are aged 65 or older.(*1) Farmers born from the mid-1920s through the mid-1940s, who have long been the backbone of agriculture, are now retiring from farming in increasing numbers. Another trend worth noting is the growing consolidation of farmland. The most recent Census of Agriculture and Forestry indicates that the farm consolidation of the last 10 years has favored farm enterprises with five hectares or more of farmland and that their share of total farmland now exceeds 50%.

In addition to these structural challenges, farms are exposed to major external factors that are influencing Japan’s economy and society as a whole. Two such factors are the Trans-Pacific Partnership agreement ratified by Japan’s Diet in December 2016 and the economic partnership agreement currently being negotiated with the European Union. Whether TPP will take effect is uncertain now that Donald Trump, who opposes the agreement, has become president of the United States. Even so, the Japanese government is still hoping that the agreement will take effect. Should TPP come into force, the value of agricultural production in Japan is estimated to decline by between ¥130 billion and ¥210 billion. While the government insists that it will implement all the domestic policies that are needed, farmers remain concerned about the future. Should such uncertainties impede the smooth transfer of farming to a younger generation, this will risk undermining the productive foundations of agriculture.

Mechanization and labor-saving measures have helped to raise the labor productivity of farming in Japan. However, if higher productivity is to lead to higher farm income, farm sizes will need to increase. While many barriers stood in the way of expanding the scale of rice cultivation and other extensive agriculture in rural communities, it has now become possible to increase farm sizes by using the land of elderly farmers. This is dependent, however, on the implementation of land-development measures including readjustment of property lines for farmland, development of irrigation and drainage channels, and improvement of the soil. Now is precisely the time for motivated farmers to express their capabilities in the drive to increase farm sizes. However, in view of Japan’s many hilly and mountainous regions, policies will also need to be developed for rural areas ill-suited to this sort of plot expansion.

A Call for Bold Agricultural Policies

Agricultural policies can be divided into (1) industry policies, (2) safety-net policies, and (3) regional policies, such as those for hilly and mountainous areas. All of these measures will need to be crafted in a balanced manner.

With regard to industry policies, it will be essential to pursue farm enlargement and other land development, to consolidate farms, and to provide investment support. A wide range of related measures are being developed. Foods produced on farms are a necessary staple and have a relatively low price elasticity. Farming is also greatly affected by the weather, natural disasters, and infectious diseases, meaning that farmers are readily exposed to variability beyond what they can cope with on their own. Given this situation, an adequate safety net will need to be put in place.

While the debate of agricultural reform tends to focus on increasing the efficiency and size of farms in flat areas, 70% of Japan’s land and 40% of the total area under cultivation consists of hilly and mountainous areas. Thus, firm regional policies to support agriculture in these areas will also be required. In short, agricultural policies must factor in a safety net and region-specific measures like these, rather than being limited to industry policies, in order to convey a strong message of confidence to the Japanese people.

Farming has shifted from a livelihood to a business and is now being practiced on ever-larger scales. As a result, it has become key for farm operators to maintain a stable management environment and to be able to anticipate policies over the medium term. The United States enacts an Agricultural Act every five years or so, and the EU revises its Common Agricultural Policy on a medium-term basis. Agricultural policy in Japan is defined by the Basic Plan for Food, Agriculture, and Rural Areas, established most recently in March 2016. Despite the major changes in the policy environment represented by the broad agreement achieved for TPP, though, the basic plan has not been revised. This can be interpreted to mean that the government remains committed to achieving the basic plan, including its production targets. Hence, building on the basic plan, there is a need to establish bold agricultural policies so the basic plan can still be realized under TPP and other trade agreements, and to implement these polices stably over the medium term.

Working to Increase Farm Income

While bold agricultural policies will be important, on their own they will not be sufficient to make farming an attractive occupation. Farmers must make creative efforts on their own and the JA Group as a whole must support such efforts so as to increase the appeal of farming. For this reason, the JA Group released a document in September 2016 compiling its undertakings, policy proposals, and recommendations for related industries with a view to enhancing farming’s appeal.

To increase farm income, the JA Group will work to reduce the distance between farmers and consumers. The National Federation of Agricultural Cooperative Associations, or Zen-Noh, which is responsible for the sale of agricultural products and the purchase of producer goods within the JA Group, has mainly sold unmilled rice to wholesalers, but it will now expand the sale of milled rice to end users as represented by the retail, food service, and prepared meal sectors (1 million tons by fiscal 2023). Zen-Noh will also expand the direct sale of fruits and vegetables (¥330 billion by fiscal 2018). The demand for vegetables by processors and commercial users is increasing year by year and now accounts for more than half of total demand. Zen-Noh will therefore expand the sale of fruits and vegetables to the processing and commercial sectors by selecting suitable varieties and by introducing new technology (¥45 billion by fiscal 2018). The JA Group also will work to increase agricultural product exports (¥38 billion by 2020).

With regard to exports, Zen-Noh has endeavored to understand the needs of foreign end users and has launched direct-sale operations, such as by establishing foreign subsidiaries and by opening Japanese restaurants. In November 2016, in coordination with Nōrinchukin Bank, it assumed control of a British food wholesaler and acquired a local supply chain. In December, the Central Union of Agricultural Cooperatives, Zen-Noh, and Nōrinchukin Bank, representing the JA Group, became signatories to a government-led cooperative agreement on promoting Japan and supporting local businesses. Zen-Noh intends to work closely with the Japan External Trade Organization, exporter organizations, economic organizations, and local governments to expand exports. By implementing these measures, Zen-Noh hopes to expand the export of Japan’s agricultural products and to increase farm income.

To supply quality producer goods more cheaply, Zen-Noh is consolidating the number of fertilizers and agrochemicals it handles, starting in autumn 2016 for rice paddy herbicides and in 2017 for domestic fertilizers. It will also reduce prices by consolidating production and sales and will cut distribution costs by making direct deliveries to large producers. Zen-Noh has already begun importing inexpensive fertilizers in large lots for producers, and will begin supplying agrochemicals in quantities 50 times the standard amount at reduced prices. In the area of livestock feed, Zen-Noh aims to develop a more rational supply system by restructuring fertilizer factories and companies by port and region. The factories of JA Nishinihon Kumiai Shiryou, for instance, will be consolidated in a new facility scheduled to begin operations in fiscal 2017. And in regard to agricultural equipment, in 2017 Zen-Noh will aim to reduce total production costs by expanding the shared leasing of large combines and rentals of vegetable equipment.

Reducing the prices of producer goods will also require industry cooperation, relaxed guidelines on recommended fertilizer application rates, and the deregulation of the system for registering generic agrochemicals. The JA Group will work to make its position on these issues known to the government and related industry. As one example of the measures to be taken, the JA Group and supporting companies have announced plans to establish a Japan Generic Agrochemical Council within the year. This body will seek to promote the appropriate and speedy introduction and spread of generic agrochemicals in Japan.

Finally, I want to discuss the program for further strengthening the competitiveness of agriculture and the plan for creating dynamism in agriculture, forestry, and fishery industries and local communities adopted by the government on November 29, 2016. These steps aim to reform how the prices of producer goods are set and the structure for distributing and processing agricultural products. They also call for the clear labeling of the origin and ingredients of processed foods and for the development of human resources. These plans should further the creative and self-directed reform of the JA Group to increase farm income; we hope that they will result in specific measures toward achieving the basic plan for food, agriculture, and rural areas.

The JA Group is committed to working together to contribute to the overall development of agriculture, the stable supply of safe and reliable food, and the invigoration of regional communities built around farming. In this way, we can advance Japanese agriculture to a new stage by acting in consort with motivated farmers.

(Originally published in Japanese on December 26, 2016. Banner photo: Akita Komachi rice waiting to be harvested in Akita Prefecture in September 2016. © Jiji.)