Rising costs, production cuts hurt dairy farmers amid multiple crises

Jiji Press

11:00 JST, December 22, 2022

TOKYO (Jiji Press) — 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 following Russia’s invasion of Ukraine.

Also battered by production cuts for raw milk after past oversupply, a growing number of dairy farmers are quitting their businesses.

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, Forestry and Fisheries Ministry, the number of dairy producers across the nation as of Feb. 1, 2022, was down 4.3% year on year at 13,300, including 5,560 in Hokkaido, which accounts for more than 50% of Japan’s raw milk production by volume, 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“This year [in Hokkaido], close to 200 dairy producers have already withdrawn from or decided to pull the plug on their businesses,” a local industry official said, pointing out that many of them have been struggling not only to deal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 repay loans they took on in the past to expand their butter-making facilities to help resolve supply shortages that had been crippling the country.

Based on an agreement from negotiations held with dairy makers in response to the situation, a Hokkaido dairy industry association raised the wholesale prices of raw milk for drinking milk by ¥10 per kilogram, starting with shipments in November and onward.

Meanwhile, they are still negotiating prices of raw milk for processed goods such as butter and cheese, which account for about 80% of all dairy products made in Hokkaido. They are aiming to reach an accord by year-end.

The government has adopted support measures such as subsidizing feed costs. It also decided to raise fiscal 2023 grants to producers of raw milk for 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 2023 production cuts having been shown, I fear that I may not be able to continue to run my business,” one farmer said, adding, “Some [around me] are being forced to give up continuing their businesses due to fundraising difficulties or finding no successors to take over their operations.”

Still, a senior official of a dairy maker said that there is a high possibility for 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 take the 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.