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Japan’s dairy industry still facing crisis after last summers typhoons
May 26, 2017

Japan’s dairy industry is in crisis mode as the country’s top milk producing area falls behind in raw milk production.

Slammed by destructive typhoons last summer and facing fundamental challenges, dairy farms in Japan’s large northern island of Hokkaido are struggling, their problems affecting people throughout the country.

“We’ve secured only 80% or so of feed for cows compared to normal years,” said Yukinori Oishi, who tends 220 milk cows in central Hokkaido. The town where he lives was one of the hardest hit by last summer’s unfortunate weather. Typhoons destroyed bridges, cut roadways and turned many fields used for growing feed grass to mud. Without access to his fields, Oishi could not harvest his grass.

He now partially relies on imported feed to cover the shortage of grass, but worries about his cows. Changing the type of feed can affect the amount of milk a cow produces.

Imported feed is also more expensive than locally grown grass. “We are struggling with soaring feed costs,” says Oishi. “At some point, we might have to consider reducing the number of cows [to correspond to the amount of available feed].”

Hokkaido’s importance

In the past few years, Japan has suffered occasional butter shortages, due largely to decreased milk production in dairy farms outside Hokkaido. These farms are generally smaller than their northern counterparts, and thus more susceptible to external forces that can affect production. Because they lack sufficient land to graze their herds, these farms rely on imported feed. And if the yen weakens, feed costs can balloon, affecting the farms’ bottom lines and sometimes resulting in closures.

As a result, Hokkaido’s share of milk production by volume increased to 53% in 2015, from 43% in 2000.

Raw milk from dairy farms outside Hokkaido is mostly consumed locally as drinking milk. To cover shortages of this milk, raw milk from the prefecture is shipped to the affected areas.

The butter shortages in 2014 and 2015 were the result of milk shipped from Hokkaido being used mainly for drinking milk rather than for butter, with shipments from the north increasing 5% to 6% annually.

Japan’s pricing structure for milk products can be blamed for this: Raw milk used for producing drinking milk is priced higher than milk used to make butter, cheese and other processed dairy products. As a result, a smaller portion of raw milk was allocated for butter.

Hokkaido accounts for more than 80% of domestic butter. The only way to increase butter production in the country is to increase raw milk production in the prefecture. Dairy farmers in Hokkaido have tried hard to do this, even going so far as to keep old cows that should be retired on milk production lines. And their efforts had paid off: Since 2015, Hokkaido had managed to increase raw milk production.

But the 2016 typhoons laid waste to these efforts. The inclement weather damaged feed grass for cows, resulting in decreased raw milk production. Since September of last year, production volume has seen year-on-year declines every month.

Rising prices

The shortage of raw milk has led the Hokuren Federation of Agricultural Cooperatives, which controls 98% of raw milk distribution in Hokkaido, to raise prices to makers of dairy products in April.

Consumers are beginning to feel the effects of the price hikes. Earlier this month, Megmilk Snow Brand raised prices of its popular cheeses by 2.5% to 4.3%. Other leading makers, including Meiji, a unit of Meiji Holdings, and Morinaga Milk Industry, are looking to increase their butter prices in June.

Meanwhile, the situation is unlikely to improve, even as the harvest season approaches. “The volume of raw milk production will keep falling over the long term,” said Morinaga Milk Director Yoichi Onuki.

Koichiro Shiozaki, a Meiji Holdings director, sees more price hikes for raw milk. “It will take a while before the price stabilizes,” he predicted.

Changes on the farm

Another factor keeping raw milk prices high is that more dairy farmers are shifting to other products.

Yasuhiro Uehara, a 53-year-old farmer based in eastern Hokkaido, stopped raising cows and began growing buckwheat several years ago. The region has been important to Hokkaido’s dairy industry. In 2009, there were virtually no fields growing buckwheat, a key ingredient in soba, a popular type of noodle. Last year, however, buckwheat fields totaled more than 700 hectares.

“Since I was small, my mother always seemed to be milking cows,” Uehara says. “She is now happy without this burden.”

Dairy farmers lead a demanding life. Cows have to be milked every day, otherwise they get sick. “Now we can get away from home and go on trips in summer and over the New Year holidays,” says Uehara.

As of 2016, the number of dairy farms in Hokkaido stood at 6,490, two thirds the number of 15 years ago.

Adding to the industry’s woes is the declining number of young dairy cows, which in a few years would be expected to start producing milk. Owing to the rising popularity of Japanese beef, some farmers are turning their dairy cows into beef cattle, which present a more lucrative opportunity with less effort.

Any way one looks at the dairy crisis in Japan, it is a problem that will not soon go away.


Source: Nikkei Asian Review


Summer 2018