Master Planning a New Era in Japanese Dairy Production

Japan Dairy Market

Leveraging NIRAS, Advisory Services and recent experience in Australia, together with our global partner WORLEY PARSONS and AUSTRADE we are building a robust business model to combat the dynamics and threats presented by the local and global dairy markets, and to protect a way of life in rural Hokkaido, Japan.

February 14, 2017

NIRAS has been engaged to work with Japanese dairy farmers and milk distributors in the context of the increasingly deregulated milk market in Japan. Through a bold and insightful initiative in Hokkaido, NIRAS with the assistance of WORLEY PARSONS and AUSTRADE will bring Australian and European experience and global perspective to partner with industry in the development of their business and production planning model.

Part of a great evolution

Selected for its industry experience and knowledge globally and for the unique software it has developed in Denmark and Australia to afford production and network optimization in the dairy industry, NIRAS is applying that knowledge to the Japanese context and is respectful of being part of a great evolution in Japanese agriculture and agricultural production. The NIRAS team is working to assist in establishing a sustainable scalable cooperative model from farm to through processing to consumer.

Japanese raw milk production has been decreasing over the last fifteen years; however, the reduction has come from nine regions other than Hokkaido. The region of Hokkaido has steadily increased production quantity, reflecting high productivity of raw milk production.

Japanese agricultural policy is not historically known for production efficiency or international competitiveness, with the Japanese government traditionally torn between domestic demand for continuing protection and international demand for lowering border protection measures. Japan has arguably lagged behind other advanced countries, including Korea, Australia, and New Zealand, in establishing networks with major trading partners, mainly because of its difficulty in lowering agricultural protection.

Dairy products are one of five sacred areas

Through the more recent negotiations including the Trans-Pacific Partnership, the Japanese government identified five areas as sacred to keep protected, being rice, dairy products, beef and pork, wheat, and sugar. The agricultural cooperatives have argued that if the tariffs on dairy products are eliminated, cheap dairy products from Australia and New Zealand would flood the Japanese market and the Japanese dairy industries would suffer a great loss.

Traditionally the Japanese government allocates a quota on raw milk regional production, and agricultural co-operatives self-impose the implicit quota on cross-regional movement. This prevents most efficient producers expanding to an optimal size, and most productive regions from increasing their market share in Japan. Further each farmer is required to sell 100% to a local cooperative or to retain 100% for self-processing into dairy products.

Considerable potential

Since processing raw milk requires large fixed investments and large quantity to process and market, almost all raw milk is traditionally sold to the cooperative. Thus, individual farmers has not been incentivised to improve the quality of raw milk or to carry out innovation in dairy products. Hence the Japanese dairy industry has been constrained in producing efficiently due to the quota and the all-or-nothing rule. Through current domestic reform and investments, the production costs of raw milk will be lowered and export potential will be significantly increased.

Edward Lynch

Edward Lynch

Managing Director

Melbourne, Australia

+61 488 786 484