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'Dairy crisis' hits Japan as farm bankruptcies see 10-year high

A dairy farmer pets a Holstein cow's head in the Mikawa region of Aichi Prefecture, on Feb. 27, 2023. Rises in the cost of feed for the livestock and other factors have put many dairy farms' business into the red. (Mainichi/Motoyori Arakawa)

TOKYO -- Bankruptcies among Japan's raw milk producers reached a 10-year high in 2022, a market research firm based in the country's capital announced on May 10.

    There were 14 bankruptcies last year, nearing the level seen in 2011, when 19 bankruptcies were declared amid the aftermath of the Great East Japan Earthquake, tsunami and triple nuclear meltdown that devastated the country. A factor behind the recent bankruptcies is that issues such as Russia's invasion of Ukraine and the decline in the value of the Japanese yen have increased the cost of feed for the livestock.

    Tokyo-based Teikoku Databank Ltd. compiled data on the number of bankruptcies in which the producers had debts over 10 million yen (about $74,486). Last year, there were 14 such cases, a jump from eight in 2021. A company representative stated, "Demand was already low due to the coronavirus pandemic, and the cost increases due to the 'double punch' of the war and weak yen only made this worse. Many dairy farmers gave up on their business."

    Dairy farmers were already in a difficult position due to a shortage of labor and the aging of workers. When the coronavirus pandemic hit, it impacted demand for dairy products in business segments such as the restaurant industry and for school lunches. Last year's onset of the Russian invasion of Ukraine and sharp fall in the value of the yen boosted the costs of cattle feed and logistics. For example, the price of straw saw as much as a 60% year-on-year rise.

    While the pandemic's effects are expected to ease, passing the rising cost on to product prices seems to be at a bottleneck. According to retail price statistics released by the Ministry of Internal Affairs and Communications, the price of a carton of milk in 2022 rose by no more than 10% from the previous year, failing to fully reflect the increased cost of feeding the cattle.

    The Teikoku Databank representative warned, "High prices are keeping consumer demand low, and there's a limit to how much prices can be increased (to reflect the rising costs). We're beginning to see a 'dairy crisis' in which domestically-produced milk becomes hard to obtain."

    (Japanese original by Yusuke Hiratsuka, Business News Department)

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