A new vision of growth for the beef industry and the expected roles of agricultural cooperatives in Hokkaido, Japan
Hiroshi Takahashi, Journalist
Bridge International Inc
1F., 1-10-1, Iidabashi, Chiyoda-ku,Tokyo 102-0072 Japan
The livestock producers in Japan continued to be exposed to the wave of free trade such as TPP (Trans-Pacific Partnership) and EPA (Economic Partnership Agreement). In the past, livestock producers in Japan were exposed to the competition against the low priced imported beef from North America and Oceania after they reached agreements of the liberalization of U.S. and Australia in 1991 and liberalization of the beef by the agricultural Agreement of the Uruguay round in 1994.
As a result, the Ministry of Agriculture, Forestry and Fisheries of Japan worked for the legislation of WAGYU labeling requirement, as well as making it a brand beef and carried forward the food safety procedures such as the traceability of the domestic beef, in order to encourage Japanese Cattle production and made sure that it should not directly compete with imported beef. As a result, Japanese Wagyu Cattle is becoming the major breed in Japanese beef production. Specifically, however, a Wagyu Cattle is needed to be fed for an extended period (Almost more than 30 months) in order to make a marble beef and most of Japanese Cattle feeders are not able to make good profit for long time due to high price of feeder cattle as well as high price of grain feeds. The reason for a higher cost of the Japanese beef is mainly due to expensive feeder cattle, high cost for long feeding, environment expenditures, materials and personnel costs expenses. Under such a difficult environment, the Tokachi-Shimizu-cho Agricultural Cooperative (JA Tokachi-Shimizu) started efforts in establishing a new fattening business using castrated dairy breed (Holstein steer) in Tokachi area Hokkaido where dairy farming district is located and tried the production of the low cost domestic beef against the low-priced imported beef.
While this report explains the world beef situation, as well as situation in Japan, I would like to report on the challenge of JA Tokachi-Shimizu against the intensively free trade wave.
Keywords: Tokachi-Shimizu Agricultural Cooperative Hokkaido Beef Holstein Wagyu
Undoubtedly, the wave of the deregulations of trade such as TPP and EPA are approaching closer and closer to the livestock and the dairy farming industries.
The livestock industry in Japan, specifically, the beef producers, have been exposed to the competition with low cost imported beef from the U.S. and Australia after the import liberalization of beef covered by the Uruguay round agriculture Agreement (the Marrakech Agreement) in 1994.
Table 1 shows the world beef production. Japan’s beef production is too small covering the domestic consumption, accordingly. Japan needs to import beef from North America and Oceania (Ref: Table 2, about 60% of the total demand quantity :).
Table 1. World beef production by volume
Table 2. Beef market of Japan by volume
As shown in Table 3, Costs between Japanese beef and U.S. beef are mainly due to Japan’s expensive feeder cattle, high feed costs for long feeding, environment expenditures, material costs, and personnel expenses. Because of limited land and pasture for cattle grazing in Japan, our farmers are not able to produce beef in quantities at low cost like the U.S. and Australia.
In Japan, majority of cattle farmers need to use imported feed-crops and even hays by very high delivery cost from North America and Australia. There are major reasons why the production cost of beef in Japan becomes quite high. Livestock industry in Korea and Taiwan seemed to be in similar condition as Japan which heavily relies on imported feed grains.
Table 3. Management indicator of US-Japan comparison of beef production cost
Here, I would like to describe how high cost Japanese beef has competed and been managed to survive against much lower prices (Ref. Table 4) US Beef and Ausie beef after the Uruguay round.
Table 4. Beef carcass market price by countries (August 2014)
After the Uruguay round (the Marrakech Agreement) in 1994, Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) felt a crisis atmosphere. It decided that Japan specializes is in producing expensive well-marbled beef which targets the niche market. This is done by doing the long-range fattening of the Japanese Wagyu Cattle (more than 30 months of age) by expending import duty income in imported beef to support Japanese beef producers. This strategy seemed to have succeeded to a certain degree.
Incidentally, beef cattle, which are fattened in Japan, are mainly of the Wagyu Cattle, Wagyu-Holstein F1, and Holstein Steers types which are different from the beef cattle breeds in North America and Oceania. (Ref. Fig. 1).
Photo courtesy of: Japan National Beef Promotion Fund Association
Fig. 1. Major breeds of cattle in Japan
However, it resulted in an oversupply due to too many participants in the classy marble beef production. The deflation of economy in Japan at that time also made the market price flounder for a long period. Then after, running parallel with the producers, the number of Japanese Cattle producers continued to decline at a lower level of 57,500 houses (6% down over the previous years for straight 4 years) in July 2014 from 80,000 houses in 2007.
As a result, the price of Japanese Cattle rose from 2012 when it was decreed for production (Fig. 2).
Fig. 2. Japanese beef (Carcass) market price (per kg ex rate/120$)
Source: ALIC beef market report graphed by author
Currently, the TPP negotiations have stopped. However the import duties of beef in the final adjustment plan after the effectivity of TPP is expected to be the following.
Fig. 3. Expected Japan’s tariff of beef after effective date of TPP
Data source: Japan Agri News 2015/8/14
Graphed by author
Accordingly, Japanese beef producers will have to face difficulties by further using low-cost imported beef which results in expected sharp cut in import duties. In addition, currently available beef producer’s subsidies funding from about US$1200million revenue from beef import duty, will most likely be reduced by about 50% 10 years later, and will further be cut down to 25% 15 years later.
The wave of trade liberalization (with TPP in the lead), cause Japanese beef producers to face double severe situation, while suffering from declining beef prices and decreasing subsidies due to the lowered import tariff.
Under such an environment, there is an agricultural cooperative in Hokkaido, Japan, which produces high quality beef at a low cost over 15 years. It is intended to introduce precisely the efforts and achievements performed by the agricultural cooperative.
Case of Tokachi Wakaushi (Tokachi Yearling Beef) of the Tokachi-Shimizu agricultural cooperative
Tokachi-Shimizu is a beautiful small town with a population of 9,900 inhabitants, situated in the center of Hokkaido Japan. It is a three-hour drive from Sapporo. The climate is cool and average temperature in January is -6.4°C and in August, (even the warmest month), the average temperature is 20.1°C. The main industry is dairy farming, livestock production and upland field cropping such as asparagus etc. (Ref. Fig. 4 Japan map).
Fig. 4. Map of famous brand beef cattle of Japan
Photo 1: “Farm in Tokachi”
© JA TOKACHI SHIMIZU
An overview of the project
Tokachi-Shimizu Agriculture cooperative (JA Tokachi-Shimizu) succeeded in making its farmers group to produce high quality Holstein steers (castrated dairy breed). Usually Holstein steers are by-products from the dairy industry.
The Tokachi-Shimizu Holstein steer farmers shortened its period of cereals fattening, making lower cost and better cash flow while maintaining its high quality. Through their own unique marketing, they established “TOKACHI WAKAUSHI” brand in the major markets such as Tokyo and Osaka Japan.
The production project for TOKACHI WAKAUSHI (TOKACHI yearling beef) is started in 1996 and six years later (2002), four farmers supplied 1,400 heads of Tokachi Yearling Beef, and 12 years later (2014), six farmers supplied 5,500 steers.
Photo 2: Holstein yearling steer “Tokachi Waka Ushi”
© JA TOKACHI SHIMIZU
Also, 12 years ago, Tokachi Yearling Beef the average age of which is 14 months old, had an average live weight: of 600kgs and average carcass weight: of 320kgs. However they have now succeeded in gaining more live weight and carcass weight while reducing feeding period i.e. average age: 13.5 months, average live weight: 620～630kg, average carcass weight: 330～340kg. These KAIZEN (improvement) were mainly done in improving its feeds components. Tokachi Yearling Beef is more profitable than regular 20 months old Holstein steer.
Table 5. Comparison of Tokachi Yearling beef (14 months) and ordinary Holstein steer (20 months)
Source: For the value chain construction of the TOKACHI WAKAUSHI, 2013 JMI ALIC
Translated by Author.
Dressed (Retail) meat weight of regular Holstein steer is worse than TOKACHI Yearling beef as shown in Table 5. The reason is that regular Holstein steers have much weight of bones and fat. Therefore, the production cost of TOKACHI Yearling beef is 20% lower than the 20 month-age regular Holstein steer.
Photo 3: Carcass of Tokachi Yearling beef
Photo © Kenji Yamamoto
On top of that, the characteristic of the TOKACHI Yearling beef (TOKACHI WAKAUSHI) is keeping even the carcass size, with uniform weight. As for the flesh color, they are bright as a whole, and the change of meat color is slow and remains steady. The biggest feature of this beef is “Tenderness” of every cut with little fat content, thus resulting in very healthy beef, easy-to- eat even for children and old people.
Photo 4. Tokachi yearling beef Loins.
© JA TOKACHI-SHIMIZU
This project has not simply shortened the fattening periods of Tokachi yearling beef to 13 to 14 months. In order to shorten the fattening period, while maintaining a certain degree of quality, JA Tokachishimizu repeated the long-term trial and error over long period feeding method by age and recipe of the feed.
Also JA Tokachi-Shimizu advocated in establishing TOKACHI WAKAUSHI (TOKACHI Yearling Beef) Council comprising of beef producers, University, Tokachi-Shimizu Food Service (Meat processor, founded by JA Tokachi-Shimizu) and ZEFCO (Meat distributor) and Advisers. The Council has set up an Advisors Board, comprising of six experts for scientific verification and marketing.
Fig. 5. Tokachi Wakaushi Council
Obihiro University of Agriculture and Veterinary Medicine
↓ ← Advisory Board (6 specialists)
↓ (Marketing, Processing, QC etc.)
Tokachi Farmers →JA Tokachi Shimizu ← Tokachi Shimizu Food Service
(Executive Secretariat) (Processing)
Photo 5. Tokachi yearling beef logo and Sukiyaki sliced beef
© JA TOKACHI SHIMIZU (Left),
© Kenji Yamamoto (Right)
JA Tokachishimizu established Tokachi food service Company by investing 100% for boning, processing, cooking and selling.
JA Tokachishimizu is selling their yearling beef not only via ZEFUCO, but also through directly selling to the end users such as restaurants and meat shops, through which they can collect comments and feedback, directly for their further improvement. As result, their efforts had raised the brand value of the TOKACHI Yearling beef. They succeeded raising 10~15% higher sales price for TOKACHI Yearling Beef than other regular Holstein steers. JA Tokachishimizu is aiming to export their Yearling beef to other Asian countries in the future.
In case of Japanese traditional type of agricultural cooperative, its role is to collect farmers’ products and sell them at public markets. Therefore, not many agricultural cooperatives did direct marketing to consumers. As a result, a number of agricultural cooperatives are exposed to the wave of the free trade without making appropriate improvement to follow the changes in the market.
However, in case of the TOKACHI Yearling Beef, an agricultural cooperative has consistently achieved a business using Holstein steers, which was not valued world-class product before, and is now regarded as high quality beef cattle with low production cost ready for further processing and distribution to the market.
Currently they are successfully competing against the U.S. and Australian beef by conducting market surveys and promotional activities, as well as participating in various events for further increasing consumer recognition and brand image, through which they have expanded sales routes and increasing returns.
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Masayoshi Honma, Kazuhiko Hotta, Hiroshi Takahashi, Tetsuhide Mikamo, Seiji Mitsuishi (2014). “Food 2040 report” Report on Japan’s Contribution to Growing Food Markets in Asia U.S. Grain Counsil
Satoru Sasaki (2014). For the value chain construction of the TOKACHI WAKAUSHI, 2013 Challenge to new demand creation for domestic beef. 27-35, Japan Meat Information Service Center
Shigeru Okada (2002). About producing and marketing of "TOKACHI WAKAUSHI". ALIC Monthly “Livestock Information” 2002.12, Agriculture & Livestock Industries Corporation, Japan
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