Agricultural Products: Increased Production Costs Must Be Reflected in Prices

Fuel and fertilizer costs are skyrocketing, but these higher prices are not being reflected in the prices paid for agricultural products, making it increasingly difficult for farmers to manage their finances. The government must expedite measures to protect the nation’s agricultural production base.

The Agriculture, Forestry and Fisheries Ministry has established a council to discuss the agricultural and food product trades. The council reportedly is mulling a system to ensure that rising costs are accurately reflected in the sales prices for related goods.

According to the ministry, fertilizer and feed prices have soared in the wake of Russia’s invasion of Ukraine, and, since last summer, have remained around 50% higher than 2020 levels. Utility costs have been spiking, too, due to higher oil prices, while agricultural chemicals are seeing similar increases.

Nevertheless, with the exception of eggs, prices for many agricultural products have been relatively unchanged since 2020. According to a survey conducted by an agrarian organization, 55% of farmers said they have been unable to pass on increased costs. Agriculturists are in a serious plight.

Prices for farming products are primarily determined by supply and demand. If crops fail to prosper due to poor weather, prices rise. Conversely, if crops flourish, prices fall. Thus, even if costs increase, it is difficult to incorporate these increases into selling prices.

Farmers face disadvantages when negotiating prices for items where freshness is a crucial factor. Competition among supermarkets keen to offer inexpensive goods is another essential element in this regard.

To ensure the protection of the nation’s agricultural domain, it is crucial for farmers to be able to turn a reasonable profit.

Traditionally, the farming industry has suffered from an aging population and a dearth of new blood. In 2020, there were only about 1.2 million people active in the agricultural sphere, representing an about 30% decrease from 10 years before. If rising costs continue to undermine farmers’ livelihoods, the industry could experience a further exodus.

Against a background in which food security is growing in importance — due to the Ukraine crisis and other factors — the current situation cannot be overlooked.

Among the council’s ideas is a proposal to create a formula in which rising costs are automatically reflected in prices.

Some observers have expressed concern regarding governmental involvement in price formation. However, in France, legal systems have been formulated to index production costs, and, to encourage buyers and retailers, factor those costs into the selling prices of agricultural products.

The possibility of a food crisis has been increasing due to the worsening security situation and global warming. Japan needs to comprehensively research the optimal methods to set prices for agricultural products.

As consumers may have to shoulder larger financial burdens, it is vital to gain public understanding. The government should carefully explain the significance of supporting the agricultural industry.

It is also hoped that farmers will make efforts to reduce costs through large-scale production and mechanization, and adding value to agricultural products.

(From The Yomiuri Shimbun, Sept. 17, 2023)