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Japan govt seeks more vigorous competition to lower agrochemical prices
Sep. 9, 2016
The Japanese agriculture ministry wants manufacturers of agricultural chemicals, including pesticides and fertilizers, to realign their businesses in a bid to lower prices, which are said to be higher in Japan than in other countries.
To lower the costs of materials and machinery for agricultural production, the Agriculture, Forestry and Fisheries Ministry plans to encourage companies to merge, integrate their own business operations, purchase other companies or integrate parts of each other’s business operations. The ministry will consider such incentives as preferential tax measures for pesticide and fertilizer makers that take these actions.
By providing lower-priced products, the ministry aims to improve the international competitiveness of domestic agriculture.
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Far above South Korea
This autumn, the government will compile its second package of measures in anticipation of the Trans-Pacific Partnership free trade pact coming into effect. The ministry’s plan will be included in the package.
To encourage this business realignment, the government is considering creating a new law or utilizing the existing Industrial Competitiveness Enhancement Law. The details will be decided later.
According to research by Nippon Nogyo Hojin Kyokai, a national association of agricultural corporations to which large-scale farming households and others belong, the prices of agricultural materials in Japan are higher than those in South Korea, where agricultural conditions are similar to Japan’s.
For example, pesticide costs about three times as much and fertilizers cost double compared with South Korea.
There are about 20,000 kinds of fertilizer in Japan, more than three times the about 5,700 kinds in South Korea. This gap has also led to the higher costs in Japan.
This situation stems from the fact that different kinds of fertilizers are recommended for each region in Japan, as soil types and climates vary among regions. As a result, fertilizer makers have to produce many different products in small volumes, which has pushed up the manufacturing costs.
Another factor behind the high prices is that the use of “generic farming chemicals,” made from the same substances as products for which patents have expired, has not proliferated in Japan.
There are also many middlemen, such as wholesalers and agricultural cooperatives, between makers and farmers. Each middleman charges a commission fee, which increases prices.
After the TPP comes into effect, domestic farmers will face competition from imported agricultural products that are cheaper. Thus it is an urgent task to strengthen Japanese agriculture’s industrial structure.
The ministry believes that Japanese farmers will be more competitive internationally if agricultural product prices fall as a result of encouraging rationalization in production plants and distribution channels through preferential taxation or other means.
The ministry aims to relax regulations related to pesticides and other farm chemicals while maintaining safety, so that the number of products registered as generic farming chemicals will increase.
Meanwhile, the market for farm machinery has been an oligopoly: The four major manufacturers, including Kubota Corp., hold a combined market share of about 80 percent in terms of shipping values.
Japan-manufactured tractors cost 30 percent to 60 percent more than those of South Korean manufacturers.
The ministry believes that if market competition becomes more vigorous, prices could fall. It is therefore considering encouraging newcomers to enter the field.
In its package of measures to prepare for the TPP, the government will also include ways to make product pricing more transparent. For example, a system is planned that would let farmers easily view price differences on the internet.
Source: The Japan News
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