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Next target in Koizumi’s agricultural cooperative reform to be “distribution system”

  • May 3, 2016
  • , Mainichi , p. 6
  • Translation

The Liberal Democratic Party’s Agriculture and Forestry Division held a project team meeting on March 30 at an office on the seventh floor of the party headquarters. Division director Shinjiro Koizumi (35) pointed out, “Prices for the same agrochemicals differ significantly [among agricultural cooperatives].” Bearing in mind the effectuation of the Trans-Pacific Partnership (TPP) agreement, the project team was established to discuss countermeasures for Japan’s agriculture. The documents distributed to the team members included a list of prices for agrochemicals sold at local agricultural cooperatives in the Tohoku and Hokuriku regions. The prices differed significantly depending on the agricultural cooperative. The difference between the highest and the lowest prices for more than half of the 144 kinds of chemicals was 20%, the largest gap between prices.

 

The data Koizumi used for the meeting marked the beginning of the “second stage” of agricultural cooperative reform. The “first stage,” which was carried out last year, was a change that deprived the Central Union of Agricultural Cooperatives (JA Zenchu) of the authority to conduct audits and provide guidance. While this reform weakened JA Zenchu’s authority, it required local agricultural cooperatives to make management efforts. As a result, Koizumi is targeting the JA group’s distribution structure. 

 

Regional agricultural cooperatives sell agricultural materials to farmers, and consolidate and sell their agricultural products. The National Federation of Agricultural Cooperative Associations (JA Zen-Noh) collectively procures materials from manufacturers and controls distribution channels for agricultural products. Farmers, however, complain that “the prices for materials are high compared to those at home centers.”

 

According to the Ministry of Agriculture, Forestry and Fisheries, prices for materials such as pesticides for rice plants and fertilizers are 20% higher in Japan than in South Korea. One factor that causes the prices to rise is the number of brands. There are about 20,000 brands of fertilizer registered in Japan for different types of climate and soil. The production output per brand is 17,000 tons for South Korea, and several hundred tons for Japan. About 50% of farmers said “there are too many brands” in a survey conducted by the ministry.

 

“I wonder if JA and manufacturers are mutually dependent and forcing farmers to pay higher prices,” said Koizumi who became the division director last October. Koizumi started to hold public hearings with producers and manufacturers from the beginning of this year. Participants, however, have simply insisted on maintaining the current system or making further management efforts, with the discussions going nowhere. Koizumi realized that there was no information to serve as a basis for the discussions. Consequently, he obtained lists of agrochemical prices from regional agricultural cooperatives and compiled them. Prior to the project team meeting, Koizumi gave a talk on the information to local agricultural cooperatives. The audience responded avidly. Some producers clamored for him to investigate their agricultural cooperatives as well.

 

This made JA nervous. Agricultural cooperatives in the Tohoku Region on the list were hounded for explanations and gave responses that sounded like excuses. “From the viewpoint of making agriculture a growth industry, there are other areas that need to be discussed,” said Zen-Noh board of directors Hitomi Narikiyo (66), expressing his displeasure. “Information disclosure is the first step toward understanding the situation,” said Koizumi. “If JA Zen-Noh can provide reasonable explanations on the price differences, that will mean there’s no problem,” Koizumi went on to say. “Otherwise, reform is needed.” He also said, “I will get to the bottom of this issue. If there is no resistance, that means nothing is being changed.” Stronger opposition seems to drive Koizumi to reform further. If he can cut his way into the distribution channels against JA Zen-Noh and manufacturers, Koizumi will be able to demonstrate the results of the reform to the public.

 

On the morning of April 22, the project team compiled an interim report including measures to raise transparency in setting prices for agricultural materials. The agriculture ministry along with JA groups will begin to conduct price surveys. The tug-of-war over distribution channels will likely continue until fall, when the overall plan for reform will be presented.

 

When the issue of high prices is pursued, farmers’ awareness of costs will be questioned. The market share of regional agricultural cooperatives is reportedly about 70% to 80% for fertilizers and about 60% for agrochemicals, both of which are gradually declining. Some cost-sensitive producers buy materials directly from commercial firms or home centers. “The government’s substantial subsidies make some farmers insensitive to costs,” said some observers. “That contributes to maintaining inefficient distribution channels.”

 

When it comes to costs, the prices for agricultural materials are just one part of the problem. In order to link Koizumi’s reform to enhancing the international competitiveness of Japan’s agriculture, it will be necessary to confront the producers, which are the LDP’s support base, instead of simply attacking the agricultural cooperatives. (Abridged)

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