Report No.250105

COMMENT

Fair Agricultural Prices to be Realized Through Industries' Commitment

Agricultural product prices have not recovered for a long time. Although Japan reportedly has overcome deflation, the agricultural prices still remain at the low level. Most of producers fill a deficit with their off-farm income that has brought about by the products sold below cost. On the other hand, imported materials are becoming a concern for food manufacturers and retailers in terms of rising prices and safety. The manufacturers and retailers should realize the need to look at domestic farm products and support their development. To that end, they will have to work with producers to identify fair prices while making an effort to gain the understanding of consumers.

According to index numbers of commodity prices in agriculture (2005 = 100) released by Ministry of Agriculture, Forestry and Fisheries at the end of September, overall index in August was 97.4, up 3.7 points from the previous month. The figure, however, has stayed below 100 since April. In the longer term, it slightly recovered in these years mainly due to transitional factors such as poor weather after continuous decrease from 1995 to 2002. Still, the index number remains at a low level.

The long-term trend of agricultural price decline has pushed farm households to the verge of failure.

According to Economic Accounts of Agricultural and Food-related Industry in FY 2005 recently announced by the ministry, the total national production for agriculture, food industry, eating and drinking places, related retail industry and others amounted to 102.8 trillion. The agricultural production decreased by 264.5 billion from FY 2004 to 9.7 trillion. 264.5 billion yen accounts for 10% of the agriculture and forestry budget for FY 2007.

The gross domestic product of agricultural industry totaled 4.8 trillion that is calculated by subtracting intermediate input cost like fertilizer and pesticide from the agricultural production representing agricultural sales. The agricultural income after subtracting consumption of fixed capital and indirect taxes from the gross domestic product was 3.3 trillion, decreased by 271 billion from the previous fiscal year.

The income per commercial farm household dropped to 1.70 million from 1.96 million in 2005. The income would be too low to make a living without another job.

The ministry conduced an ongoing survey on operations of full-time farm households from 1995 to 2005. The result of the survey shows that agricultural gross income decreased from 11.63 million to 11.00 million while agricultural expenditure increased from 6.50 million to 7.07 million, resulting in the fall of agricultural income by 23% from 5.13 million to 3.93 million. Additional income such as off-farm income and pension now make up for the decreased income.

This is attributable to low agricultural and livestock prices. Food industry has kept prices of livestock products, vegetables and fruits at low level through an import of inexpensive foreign products that are raw materials of foods. Japanese agriculture may suffer devastating damage depending on the development of World Trade Organization (WTO) negotiations on agriculture. Agriculture, food manufacturing and retail industries are all in the same boat.

In order to avoid such tragedy, food-related industries, demander, are required to determine domestic agricultural prices at fair level. In addition, they have to work with producers to gain the understanding of low-end consumers for the price raise. Producers, of course, are responsible for providing safe and quality agricultural products.

（Editorial from Nihon Nogyo Shimbun on October 5, 2007）

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