March 11, 2016 3:31 am JST

Milk distribution becomes focus in Japan's butter shortage

TOKYO -- Japan's unique milk distribution system has emerged as the key culprit in the nation's ongoing butter shortage, with entrenched farm interests rejecting proposed reforms that would increase direct sales to dairy producers.

     The distribution of raw milk is controlled by 10 regional co-ops appointed by the government. Farmers sell their milk through these organizations, which negotiate with and sell to dairy companies that produce butter and other products.

     These special co-ops control roughly 95% of raw milk distribution, thanks to their monopoly on government subsidies totaling 30 billion yen ($265 million) annually. Farmers who sell through the co-ops receive a slice of that assistance, but "outsider" farmers and wholesalers who bypass the organizations do not.

     The government's Regulatory Reform Council thinks having the vast majority of Japanese milk go through these co-ops makes it difficult to adjust output quickly based on market demand. The co-ops also decide how much milk is allocated for producing other dairy products such as butter and cheese.

     "There is something wrong with the system when pastry shops have no butter," Taro Kono, minister in charge of administrative reform, said in a meeting Thursday. The reform council is seeking a way to distribute subsidies to the co-ops and to outsiders.

     But the Ministry of Agriculture, Forestry and Fisheries and lawmakers with ties to farm groups are fighting such measures, insisting the co-ops are necessary to stabilize farmers' income. It's unclear whether any progress will be made in addressing the butter shortage.

(Nikkei)

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