How the TPP will turn Japan's fruit & veg market

Photo: OGAKI, JAPAN - APRIL 16: (CHINA OUT, SOUTH KOREA OUT) Farmers pollinate flowers of Nashi pears (Japanese Apple Pears) on April 16, 2015 in Minokamo, Gifu, Japan. The harvest season will start in August, known as one of popular autumn fruits. (Photo by The Asahi Shimbun via Getty Images)

The Abe government in Japan has lost no time creating various taskforces and announcing initiatives they plan to push through. In agriculture it has its work cut out, given there are about 2.5 million farmers and another three million hangers-on (wholesalers, distributors, and local bureaucrats) who form an important voting power in Japan's unequal urban-vs-rural electoral arrangements.

It will be interesting to see what the government does about Japan's 1.15 million rice farmers in particular, who are already scarfing up large amounts of subsidies while they leave their fields fallow and work part-time as taxi drivers.

Their representatives are of course howling for even more compensation but with such a huge deficit facing the nation, the Japanese government seems to be wising up a bit.

SMART PUSH

Japan recently announced it would strengthen financial support for farms exporting high-grade vegetables and fruit abroad, while pushing those rice farmers to provide their grain as feed for livestock instead of humans.

This is much smarter than simply giving handouts since those farmers who really want to stay in business will have to focus on and work at doing so. We imagine a lot of part-timers will consider taxi driving as more attractive option

The TPP will have a strong impact on Japan's agricultural sector but it might not be all negative. We think the nation's high-end fruit and vegetable sector may do very well from the agreement as it will push them to improve production methods to compete on a world-class level.

We don't think it will necessarily push growers to reduce prices - in fact, just the opposite. Japan has always stood for high-quality not-so-cheap products and her fruit production will likely follow the same path.

This won't necessarily mean ¥10,000 melons in Hong Kong but it certainly will mean ¥200 apples and nashi pears (and many other fruits and vegies). We recently returned from a business trip to Shanghai and were surprised to find prices in city supermarkets were very similar to here in Japan. The difference is in Japan you can actually trust what you are buying

Exports of Japanese fresh fruit and vegies are going very well. Fruit shipments last year rose 73 per cent to ¥7.2 billion over the previous year. Much of this was 14,000 tons of apples and 315 tons of strawberries. Scallop exports also jumped significantly, up 53 per cent to 63,000 tons, with most (70 per cent) going to China.

Surprisingly, or perhaps not, Japan also exported 1,256 tons of eggs, up 56 per cent over last year, thanks to Hong Kong consumer fears about Chinese and US bird-flu. This all bodes well for Japan's goal of national agricultural exports increasing to ¥1 trillion by 2020.

Apples make a good case study. The world's largest exporter of apples is China at 37 million tons, and of this it shipped about 865,000 tonnes abroad.

However, given domestic consumption is also 37 million tons, demand exceeds availability domestically. Next in size is the USA with 861,000 tonnes. After that you have Chile, New Zealand, Canada, and Argentina.

Given this, what chance does Japan with its 14,000 tonnes have against these massive competitors? Well, frankly you only need go to a SouthEast Asian supermarket to find out.

The storage and storability of the Chinese and US product is often of low quality, resulting in dry, soft apples that look great on the outside but which are extremely disappointing when eaten.

Conversely, given the Japanese operate an end-to-end logistics chain through such vendors as Nippon Express, they have better/cheaper cooling, volumes and frequency. The product gets to the end markets quicker and in much better condition.

Bite into a juicy, crisp Japanese Fuji apple and you'll soon understand why middle-class Asian consumers are willing to pay a bit more to get the real deal. 

THIS APPLE IS FOR TURNING

By the way, did you know about 30 per cent of Japanese apples are ripened using two-layer bags wrapped around each apple? The average Japanese farmer touches their apples 10 or more times (versus one-to-two times at harvest time for western cultivators).

If this sounds labour-intensive, it certainly is. The first contact is when the farmers pluck excess blossoms by hand. Then the apples are individually bagged to keep birds and insects out, and when fully grown are a creamy white colour (apparently, we've never seem them at this stage ourselves).

The outer bag is then removed for the last week or so and depending on what colour filter is applied to the inner (remaining) wax bag, you will get red, green, or purple apples.

Reflective sheets are placed on the ground to increase sweetness and apples are turned two to three times to ensure even exposure to the sun. All of these steps ensure superior taste and storability, and of course when picked they are in perfect condition.

Unfortunately while this love and attention ensures a great product and one that is absolutely safe to eat, the cost of the manpower involved has ensured the number of bagged apples produced in Japan has fallen from 70 per cent to the current 30 per cent in just the last 15 years.

It's likely increased competition from other countries will force farmers to find some way to automate this process while keeping their proven techniques alive. Direct competition using the same methods as western cultivators won't provide a competitive product.

Instead, the Japanese will have to find a way to automate the time-proven growing methods they have used in the past - which sounds like a perfect opportunity for some enterprising farmer's kid in university to develop an apple bagging/turning robot.

Terrie Lloyd is a long-term technology and media entrepreneur living in Japan. This is an edited version of his weekly blog from Japan Terrie's Take (http://www.terrielloyd.com)