The effect of Agriculture-related activity on firm-level profitability

in JAPAN

KYOTO University Oda Shigeaki , Nagatani Tasuku

1

Our interest-1

★Change of scene over family farm business • acceleration of demographic aging • low price of agricultural products • globalization • unusual weather • bird and animal damage problem • fear for the future • Expansion of abandoned cultivated land

2

Our interest-2

★expectations to industrial farm business • expectations to company business way • upsizing of scale • stabilization of production • creation of new jobs • conservation of regional resources

3

Exchange from family farm to industrial farm

・Spotlight to new comers ⇒ industrial farm business ・The way to the industrial farm business ①Development from family farm business ②Development from organized farm ③Entry to primary sector by agricultural cooperative ④Entry to primary sector by secondary and tertiary sector

4

current situation of agriculture in Japan-1

Year Commercial

farm household

Full-time Business type

Noncommercial farm household

Non-farmer with land

owned

2005 1,911,434 416,038 391,266 877,624 1,184,052

2010 1,587,711 425,179 328,113 889,680 1,353,960

Change rate 83.1% 102.2% 83.9% 101.4% 114.3%

・The number of commercial farm households is decreasing. ・The number of full-time and business farm households are increasing. ・While the number of Non-farmer with land owned is increasing rapidly , corporation or organized farm aiming to upsize are increasing.

5

current situation of agriculture in Japan-2

0

0.2

0.4

0.6

0.8

1

0 0.2 0.4 0.6 0.8 1

cumulative %

of cultivated Land

cumulative % of Farmers from smallest to largest scale

～ 1.0 ha

1.0 ha ～ 2.0 ha

2.0 ha ～ 3.0 ha

3.0 ha ～

2005

2010

・There are still many small-scale farmers ・Large-scale farmers get larger. ・The half of farming land in Japan are cultivated by Large-scale farmers

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family farm business in Japan

All farm Family farm Organized farm

2005年 178,964 176,637 2,327

2010年 155,482 152,966 2,516

・At 2010 , 98.3% of All farm is family farm. ・From 1990 the number of non-commercial farm business is decreasing , but increasing recently. ・Aged farmers retire from commercial farming and become non-commercial farmers.

0

5

10

15

20

25

30

35

40

1990 1995 2000 2005 2010

10 thousands All farm household Commercial Non-commercial

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new comer to the agricultural industry

All farm Organized farm year Corporation Non-

corporation 1990 ・・・ 2,026 ・・・ ・・・ 1995 ・・・ 2,089 ・・・ ・・・

2000 ・・・ 2,386 ・・・ ・・・

2005 178,964 2,327 813 1,503 2010 155,482 2,516 1,014 1,494

・New comer : non-family farm business ・community farming ・joint public-private venture farming ・corporate farming ・The number of these new comers is increasing rapidly and they are trying to process and to sell directly to consumers

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Expectation to industrial farm business

●Taking the lead in the local area farming ●technology diffusion in the local area (including reception of internship for farmers) ●acquisition of added value by agricultural-related activity ●creation of new jobs ● local revitalization ●conservation of regional resources

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●The Image

Diversification of sales

profit-making

enterprise

Creation of new jobs

Expand of sales

Industrial farm business

Market growth

Stabilization of financial ground

human resource development

Development of business

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To begin with

• In Japan, since early times there are many agricultural products for processing.

(Ex. grape , tea , potato , etc.)

• We have produced ,marketed and consumed these products in conjunction with related industries in the region

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What is agricultural-related activity

• The activity is linkage between primary sector and other sectors(secondary sector , and tertiary sector)

• IMPACT A. freewheeling thinking free from common sense B. generation of new market and demand

12

The target

• effective utilization of regional resource in the agricultural community

●processing and marketing by farmers ●export of agricultural products ●entry to primary sector by secondary and tertiary sector ●linkage with all sectors

13

The Image

●agricultural products ●food waste ●experience ●wisdom ●natural energy ●land scape ●tradition ●culture

Effective utilization

Regional resource

Other sectors carrying on a new business

○tourist business ○cosmetics industry ○information technology industry ○energy industry

agricultural-related activity on firm-level profitability

★Source of added value by totalizing of production and processing and marketing ★Secondary and tertiary sector’s entry to primary sector ★ generation of new regional business ★generation of new regional industry ★usage of renewable energy sources

local revitalization 14

Certification

• Ministry of Agriculture, Forestry and Fisheries of Japan is driving this project.

• The ministry also certifies farms’ business.

• This project is also established by law.

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The effect to the primary sector

A. creation of new jobs B. creation of regional brand C. increase of sales D. get a reputation E. get a much visitor

in this situation, ①we need to keep the business scale ②we try to upsize the business scale

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The number of certified farms HOKKAIDO 50

TOHOKU 80

KANTOH 91

HOKURIKU 35

TOKAI 63

KINKI 154

CHUGOKU/SHIKOKU 98

KYUSYU 104

OKINAWA 23

Total 698

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Variety of the certified business

Processing and direct marketing 53.7%

Only processing 33.0%

Processing and direct marketing and restaurant 7.1%

Only direct marketing 4.3%

Processing and direct marketing and export 1.4%

Only export 0.4%

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Production of the certified farms

Vegetable, 33.4

Fruit, 20.6 rice, 12

animal product,

12.8

been, 4.1

fishery product, 3.7

wheat, 2.8

forest product, 2.5

tea, 2.2 flower, 1.4 others, 4.5

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The Challenge of industrial farm business

●For the INSIDE ⇒achieve designated goals ⇒profit-making enterprise ⇒Shakeout of business management ⇒Diversification of management organization

●For the OUTSIDE ⇒Behave in a socially responsible manner ⇒New Departure with agricultural-related activity ・Act as HUB in local area network of farming ・Create a close alliance with another actor

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Family farm business

Industrial farm business

The Image

Local area

21