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Saturday, July 24, 2010
Farm policy needs more scrutiny
Income compensation for individual farmers is an important policy of the Democratic Party of Japan. By the end of June, 1,319,277 farming units applied to join the system, meeting the farm ministry's goal of enrolling 1.2 million of Japan's 1.8 farming households in the system.
In fiscal 2010, the system applies to only rice production. The ministry plans to cover more crops from fiscal 2011. Farmers whose production cost constantly tops the sale price can join the system. If they agree to reduce the area of rice paddies to grow other crops like wheat, the government pays ¥15,000 per 10 ares (1 are = 100 sq. m.) of rice paddies plus payments according to falls in rice prices.
The fiscal 2010 budget for the system is ¥560 billion. If the system is expanded in fiscal 2011, ¥1 trillion will be needed. It is aimed at cutting oversupplies of rice and stabilizing rice prices while ensuring a certain level of income for farmers. The farm ministry estimates that some 1.18 million farming units must join the system if oversupplies of rice are to be cut. It appears that the minimum condition to make the system work has been met. Many farmers in the Hokuriku, Tohoku and Hokkaido regions, which are Japan's centers of rice production, have decided to take part in the system.
But it is difficult to know whether the system will succeed in reducing oversupply of rice. It seems that some farmers, who have contracts to sell their rice directly to large distributors or fast food chains, have opted not to join the system. They will increase rice production even if rice prices fall, because doing so will compensate for the price drops. The ministry needs to survey these farmers to ascertain their production plans and their effects on rice prices.
The system's mechanism to pay more to farmers if rice prices fall may increase the government's financial burden. Under the system, small-scale farms may choose to continue rice production even if they are in the red. The government needs to delve into the weak points of the system and improve it in order to gain the support of the general public and the opposition parties.