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New Technology, Big Business Enhances Industry

March 23, 1999

Corporate giants are making their way into the farming industry. These firms are not confined to those like granaries and food product makers, which have long held close ties to agriculture. Even businesses with no previous connection to farming are starting to bring their investment capital and technological prowess to this field. Due to the Big Bang financial reform program and transformations in product distribution systems, business frameworks across all sectors are starting to break down. Japanese agriculture, which has traditionally been comprised of small-scale, family-run farms, is also feeling the effect of these changes.

New Business Opportunities
The entry of big business into the agricultural field was initially prompted by sweeping reforms in the industry's systems of production and distribution. In production and sales, for instance, goods have traditionally followed a fixed path--from grower to local farmers' association to wholesaler and, finally, to retailer. Recently, however, an increasing percentage of produce is reaching the consumer by means of a more direct route. Due to a growing number of large-scale restaurants and supermarkets in need of high-volume shipments, and a consumer base with an increasingly broad range of tastes and concerns about product quality, the traditional system of distribution--which up to now has catered primarily to small-scale retailers--has grown outdated. As a result, the demand for new products and new distribution channels has provided a window of opportunity for large firms. Government policies announced at the end of last year aimed at loosening restraints on purchases of farmland and investment in corporate farming ventures are also encouraging these companies.

Car Maker Turns to Spuds
A diverse and impressive lineup of players is making headway in the industry. Last year Toyota Motor Corp. established a biotechnology and afforestation division. This year, using the Ministry of Agriculture, Forests, and Fisheries' agricultural test site in Kyushu, the company is developing a sweet potato to be used as food for livestock in an effort to increase domestic production of animal feed. An affiliate of Secom Co., which deals in security systems, is using its technological know-how to grow 15 varieties of herbs hydroponically. And last year Mitsui & Co. began offering a consulting service to small farmers on such issues as farm infrastructure, production, and marketing.

Other companies are adding even more diversity to the field. One of these is an offspring of healthcare product maker Omron Corp., which in a joint venture with an agricultural product research and development company has constructed the nation's largest glass hothouse in Hokkaido, measuring 7.1 hectares in total area, for the cultivation of premium-quality tomatoes. The hothouse's environment, including temperature, fertilizer density, and watering cycles, is totally controlled by computer. By maintaining optimal growing conditions, the company has achieved tomatoes that are richer in nutrients and have a higher sugar content than ordinary varieties, resulting in a product with consistently high quality. The company is forecasting yearly sales of about 700 million yen (5.8 million U.S. dollars at 120 yen to the dollar), and plans on constructing at least 10 similar-sized hothouses in the future.

High Hopes
Some feel that the entrance of big business into farming will result in small farmers being driven out of business. But many others see this development as an opportunity for the industry to receive a well-needed injection of modern technology, which should enhance production and distribution. The president of Omron's tomato cultivation center comments: "By utilizing the technology of the Omron group, it is my desire to change the gloomy outlook of this industry, and provide a spark of hope to the next generation of farmers."

Trends in JapanEdited by Japan Echo Inc. based on domestic Japanese news sources. Articles presented here are offered for reference purposes and do not necessarily represent the policy or views of the Japanese Government.