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Politics

Co-op reforms seek to end smallholder bias

TOKYO -- Diminishing the power of Japanese agricultural cooperatives' central union, which has more often than not spoken for "part-time" farmers, will mark a step in the right direction. But more effort is needed to halt the decline of Japanese agriculture.

     The biggest problem with the co-ops is that people for whom farming is a side job constitute a majority of their membership, creating an obstacle to achieving economies of scale. The Central Union of Agricultural Cooperatives, or JA-Zenchu, has served as a political lobby for such smallholders while stifling innovation at the local level. Prime Minister Shinzo Abe's government is now taking an ax to this power structure.

     And not a moment too soon. Japan's farms need to make a quantum leap in size. The average age of the farming population has risen to 66, while the average area under cultivation amounts to little more than 2 hectares per farm. By one estimate, this needs to grow to several dozen hectares to prevent arable land from falling into disuse. Should the ambitious Trans-Pacific Partnership free trade agreement become a reality, domestic growers would face far greater competition from low-priced overseas competitors than they do now.

     Opportunities for change already exist. For starters, agriculture has attracted a growing number of new entrants in recent years. Nearly 1,000 businesses have begun farming since the passage of farmland reforms in 2009, although joint-stock companies still face restrictions on owning fields. Retail group Aeon now runs 16 farms, producing mostly vegetables for its supermarkets. It will start growing rice this spring.

     Farming businesses have shown that they can thrive without help from JA co-ops. Yasaiclub, a small company in the village of Showa northwest of Tokyo, sells produce from more than 60 growers to restaurants, grocery stores and other customers. Similar networks of independent growers are cropping up across Japan.

     The roughly 700 regional JA co-ops need such innovative management. In many cases, they have failed to stop prices from falling because they bear no market risk, or have undermined farmers' efforts by selling at uniform prices.

     The co-ops understand what needs to be done. JA-Zenchu unveiled last November its own reform plan calling for such steps as switching to direct sales of produce to restaurants and retailers. The government was not impressed. Seeing no guarantee that JA-Zenchu would do what it had resisted before, Tokyo decided to dismantle the organization. But the plan did make a number of good points.

     Fostering healthy rivals is one way of forcing JA co-ops to evolve. The more new entrants and breakaway groups they must contend with, the harder co-ops will have to work to increase members' earnings.

     Much more remains to be done to empower the co-ops, such as ending restrictions on rice cultivation and promoting exports. Fundamentally, agricultural policy must stop serving the average farming household and start encouraging the kind of above-average management that can make the sector stronger. Only then will farm reform bear fruit.

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