Japanese dairy farmers are in an increasingly tough situation, hit hard by rising production costs blamed partly on higher prices of formula feed for milk cows since Russia’s invasion of Ukraine.
Also battered by production cuts for raw milk after past oversupply, a growing number of dairy farmers are quitting the business.
An industry organization in Hokkaido, one of the biggest production areas for dairy goods in Japan, has decided to cut production for 2023, stoking concerns over impacts on local dairy farmers.
According to data from the agriculture ministry, the number of dairy producers across the nation as of Feb. 1 was down 4.3% year on year, at 13,300. Hokkaido, which accounts for more than 50% of Japan’s raw milk production by volume, had 5,560 producers, down 2.8%. The nationwide number has been falling around 4% annually over the past 20 years or so.
“This year (in Hokkaido), close to 200 dairy producers have already withdrawn from or decided to pull the plug on their businesses,” a local industry official said, pointing out that many of them have been struggling not only to deal with higher feed costs and production cuts but also to repay loans they took on in the past, to expand butter-making facilities in order to address supply shortages.
Based on an agreement reached in negotiations with dairy producers in response to the situation, a Hokkaido dairy industry association raised the wholesale prices of raw milk for drinking by ¥10 per kilogram, starting with shipments in November.
They are still negotiating on the price of raw milk for processed goods such as butter and cheese, which accounts for about 80% of all dairy products made in Hokkaido, and are aiming to reach an accord by the end of the year.
The government has adopted support measures such as subsidizing feed costs, and also decided to raise fiscal 2023 grants for producers of raw milk for making processed dairy foods by the second-biggest margin on record.
However, these support measures do not seem to be enough to dispel concerns among Hokkaido dairy farmers. “With a policy of production cuts in 2023, I fear I may not be able to continue running my business,” one farmer said, adding, “Some (around me) are being forced to give up on continuing their businesses due to fundraising difficulties, or being unable to find successors to take over their operations.”
Still, a senior official at a dairy producer said that there is a high possibility of a rise in demand for domestically produced raw milk for products such as cheese, while noting that imports have a share of more than 30% in the Japanese dairy market.
The official also pinned hopes on growth in dairy exports, saying, “Japanese (dairy) brands are very highly rated in (other) East Asian countries.”
But if the number of dairy farmers continues to decrease, the industry would fail to seize such opportunities — possibly leading to chances to turn around the sector’s current dire situation being lost, industry analysts said.
The dairy industry is at a very critical juncture for its future, they said.
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