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Commodities

Wagyu beef under threat

Calves in the auction arena at a livestock market in Chiba, east of Tokyo.

TOKYO -- Soaring calf prices are putting such strain on Japan's beef producers that the entire industry faces a potential crisis.

If sky-high beef prices start dipping, cattle breeders will find themselves operating in the red.

As the calves are brought into the arena at a July 12 auction at the livestock market in the city of Chiba, the eyes of dealers from across the country are glued to the display showing the animals' place and date of birth and their starting price.

Most of the calves are crosses between wagyu breeds and dairy cows.

Such crossbreeds fetch slightly lower prices than pure wagyu, and make up much of the Japanese-reared beef sold in supermarkets.

The highest bid at the Chiba auction was 510,000 yen ($5,090), up 80% from five years ago.

"It's not necessarily the higher the better," said the head of the association of livestock dealers in Chiba Prefecture.

According to observers, high prices for low-quality calves are not good for the health of the industry. Producers will be in trouble, for instance, if they pay high prices for calves with slightly distorted knees. Once fully grown, they may not be able to support their own weight, which will amount to several hundreds of kilograms.

"In markets across the country, prices often don't reflect the quality of calves," one auction participant said.

Even very young calves often fetch unreasonably high prices. A calf younger than 60 days old was sold for over 400,000 yen.

"Prices have gone through the roof," said a farmer, who rears 1,000 beef cows in Chiba Prefecture, east of the capital.

Prices have reached levels where producers can barely turn a profit, but with employees to pay, they have no choice but to buy at high prices.

A lot of beef in the country now comes from dairy farms rearing crosses between male wagyu and female Holsteins through artificial insemination.

Dairy farmers can make more profit by selling beef cows in addition to selling milk, for which prices are fairly constant.

The ratio of crossing between wagyu and dairy cows now stands at 51% for much of the country.

More than a half of the calves borne by dairy cows are sold for beef, meaning their number will gradually decline. As a result, the number of wagyu crosses will also fall.

Prices of the prized meat have also been rising due to a shrinking cattle population. The number of Kuroge, or Japanese Black, wagyu stands at around 1.59 million, down 14% from its peak in 2010.

Many breeders are now in their 70s, and are being forced to shut down due to a dearth of willing successors.

The average price of a wagyu calf was 790,000 yen in July. The prices has slightly fallen from its peak, but is still more than double that of five years ago.

The head of wagyu breeder Harada Chikusan is worried about the future of the business.

Pointing to a cow at the company farm, he said, "We bought the cow for 700,000 yen as a calf, but we have no idea how much it will fetch when we sell it after two years of rearing."

At the benchmark Tokyo market, wholesale carcass prices of top-quality wagyu are peaking at just over 2,800 yen per kilogram.

Securing the viability of the Japanese beef industry requires an effective strategy to deal with the shortage of calves -- the root cause of the problem.

(Nikkei)

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