Country Focus: Japan

by Intern Intern1
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Agriculture makes up only 2% of Japan's G.D.P., but 15% of the population lives on farms. Most are only part-time farmers, and households rely on off-farm sources for 85% of their income. Some 70% of all farms are less than I hectare, resulting in a capital- and labor-intensive agricultural sector.

AGRICULTURAL POLICY. Japan has a large and powerful agricultural cooperative system consisting of Japan's many small farmers. Until recent years, this sector had lobbied successfully for maintenance of the status quo: small farms, high support prices and prohibitive tariffs on some imports.

But the farm base is dwindling as its population ages, and the high costs associated with traditional policies have forced reforms. Support prices for key grains such as rice and wheat have been reduced, and tariffs have been lowered on beef and citrus imports.

Still, the government retains control over all staple grains, including wheat and rice. Under the Staple Food Control law, MAFF controls domestic policies, such as the amount of land in production, pricing and distribution. The Ministry Of International Trade and Industry, although not an official agricultural agency, is involved in agricultural trade through its import allocations.

WHEAT AND FlOUR MARKETING. The Japanese Food Agency, a part of MAFF, directly controls both producer and resale prices of wheat. The Agency also is the only source of wheat for the majority of Japan's flour production.

The Agency imports most of Japan' s wheat and sells it to millers at two to three times the c.i.f. import price. Profits made from those mill sales help offset the costs of buying the small domestic crop, for which farmers receive up to five times the c.i.f. price.

Under pressure from domestic flour millers and wheat exporters, the government from 1986 through 1992 steadily reduced its producer purchase and resale pnces. As a result, prices for both domestic and imported wheat declined by 5% to 10%.

Even so, the resale price for domestic wheat in 1993 was 49,450 yen, or about U.S.$470 a tonne at current exchange rates, while the resale price of imported wheat was 61,791 yen, or U.S.$585. The price differential between domestic and imported wheat exists because of mills' reluctance to buy the relatively low quality domestic crop. Meanwhile the producer purchase price in 1993 was 140,167 yen, or about U.S.$1,320 a tonne.

Flour millers are permitted to import wheat outside of Food Agency control, but only if the millers export an equivalent amount of wheat flour. Wheat imported privately for this purpose may be bought at world prices, which generally are less than 506c of official resale prices, making the process extremely profitable for mills.

This type of trade also provides outlets for lower quality flour that would have little value in the domestic market. But to avoid protests from other wheat flour exporters, the Food Agency maintains Japan's flour exports at a fairly stable level each year.

In 1991-92, Japan exported 412,000 tonnes of wheat flour, with the bulk shipped to other Asian countries. Hong Kong accounted for more than 50% of the total, taking 275,000 tonnes.

FLOUR MILLING AND CONSUMPTION. Japan has 189 flour mills with a total annual capacity of slightly more than 10 million tonnes. Mills are dispersed througllout the country, although four major companies have large mills along the Tokyo Bay.

Some 40% of Japan's mills have it daily milling capacity of 100 tonnes or fewer, and another 33% have a capacity between 100 and 200 tonnes. The remaining 27%, or 52 mills, have a daily capacity of more than 200 tonnes.

Japan's market for flour-based foods is relatively mature and stable. Per capita wheat for food consumption stands at about 32 kilograms, and flour production between 1982 and 1991 was in the range of 4.4 million to 4.6 million tonnes a year.

Bread and rolls consume about 36.3% of annual flour production, with noodle use running a close second at 36%. Confectionery use accounts for nearly 13% of total flour production.

Bread flour typically is processed from several wheats, including Australian prime hard, U.S. spring and hard red winter and Canadian spring. Japanese noodles are made from Australian standard white and U.S. western white wheats, while Chinese noodles are made with U.S. hard red winter wheat.

The flour milling and baking industries are highly automated, requiring uniformity in the raw products used.

Although pasta consumption to date has been modest, it is gaining popularity among younger Japanese, and demand is expected to grow in the future. Total durum wheat consumption in 1993 was estimated at l50,000 tonnes, virtually all of that imported from Canada and the U.S.; since 1990, Japan also has imported an annual average of about 43,000 tonnes of prepared pasta products, including stuffed pasta.

FEED INDUSTRY. Although Japan's annual feed production has been fairly stable in the past few years, the industry is undergoing slow change. The longer-term production trend is down, inefficient plants are closing, and other plants are merging with larger facilities. As of March 1992, 175 feed mills operated in Japan, compared with 200 six years earlier.

Some of the contraction in the feed sector is due to changes in the livestock industry, which has faced stiff competition from imports, especially of beef and poultry. From 1988 through 1992, Japan's beef imports surged by 30%. Imports are expected to fill a large share of future meat and poultry consumption increases, putting further pressure on the domestic livestock and feed sectors.

In the past two years, Japan's mixed feed production has averaged about 26.6 million tonnes, and that amount is expected to decline by 1% in 1993-94. Of the 26.8 million tonnes of grain used in compound feed in the past two years, slightly under 47% was maize. The ratio can fluctuate slightly, depending on price relationships between maize and competing feed grains, particularly sorghum.

Japan relies on imported maize for some 99% of its annual consumption of 16.5 million tonnes. About 4 million tonnes of the total is used for industrial products such as maize starch and alcohol.

Japan's feed industry also uses a significam amoum of barley. Consumption for feed in the past few years increased by more than 20%, averaging about 1.56 milion tonnes annually. Indications are that the increase stemmed from longer fattening periods for beef cattle in an effort to improve domestic beef quality.

Feed grains are traded in the private sector, although a quasi-governmental agency, the Mixed Feed Supply Stabilization Organization also maintains some stocks. In addition, barley imports may be handled only by the Food Agency, which then sells to authorized organizations.

TRADE ISSUES. Japan is the world's largest net agricultural importer. Its trade policy traditionally minimized imports where possible, or if not; possible, emphasized raw material imports.

Pressure surfaced from trading partners in the 1980s to open the Japanese market to value-added agricultural products. As a result, the government agreed in 1988 to permit expanded imports of beef, citrus and other processed commodities.

Other trade liberalizations will evolve under the Uruguay Round pact of the General Agreement on tariffs and Trade; Japan, forced to import rice in 1993-94 because of a poor crop, gradually will open its market permanently to small amounts of rice imports under the GATT provisions.