Business

Aeon starts large-scale rice production as companies replace farmers

by Aya Takada

Bloomberg

Aeon Co., the nation’s largest supermarket chain, now plans to become the nation’s largest rice grower.

Starting with 11 hectares of rice paddies leased from local farmers, its Aeon Agri Create Co. farming subsidiary is due to begin production at a site north of Tokyo in Saitama Prefecture next year, Aeon spokesman Norihito Ikkai said.

Chiba-based Aeon, which sells everything from fresh food to bicycles in its 424 stores, aims to lease 100 hectares — almost 50 times the average farmer’s plot — by 2020.

That would make it the biggest rice-producing company in the country, according to Arihiro Muroya, chief economist at the Norinchukin Research Institute.

Prime Minister Shinzo Abe’s administration is creating land banks in all 47 prefectures by renting paddies from farmers and consolidating them into larger areas for leasing to farming corporations.

He hopes that 80 percent of the nation’s farmland will eventually be cultivated by large-scale farms, making rice production more competitive at a time when Japan is seeking to bolster its economy via participation in U.S.-led trade liberalization talks.

“We want to supply rice and vegetables to consumers at more affordable prices and in a stable way,” Ikkai said. “As Japanese farmers are aging and retiring, we can take over production through our farming subsidiary.”

Convenience store chains Lawson Inc. and Seven & I Holdings Co. are also investing in cropland and training young people to work the fields as Abe cuts subsidy payments to rice growers and older farmers put down their plows.

“Abe’s reform plan is making progress,” said Nobuyuki Chino, the president of Continental Rice Corp., a grain trader in Tokyo. “As rice prices are falling this year due to oversupply, the exit of small and inefficient farmers from rice production will accelerate, increasing land leasing to farming corporations.”

Aeon entered agricultural production in 2009 through the subsidiary, and operates 15 farms across the nation, growing vegetables and fruits on 230 hectares of land. Its entry into rice farming follows the decision last month by Sumitomo Chemical Co. to start rice production and sales in Japan.

The country is the world’s 10th largest rice producer, according to the U.S. Department of Agriculture. Rice planting has halved from a record 3.2 million hectares in 1969 and production will be 7.9 million metric tons this year, according to the agriculture ministry.

The ruling coalition is taking steps to increase corporate participation in agriculture as pressure increases from the United States and other farm-exporting countries to cut import tariffs.

Abe’s Liberal Democratic Party proposed a legal revision to allow nonfood companies to own almost 50 percent stakes in farming entities, up from the current 25 percent, and to streamline approvals of land sales by individuals to farming corporations.

The rule changes would increase the number of agricultural ventures between farmers and companies and reduce the power of JA-Zenchu, the nation’s largest farm lobby and an opponent of the U.S.-led Trans-Pacific Partnership trade plan, said Chino at Continental Rice, who has traded grains for almost four decades.

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