• Kahoku Shimpo

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With natural disasters and the COVID-19 pandemic affecting business significantly, many farmers in the Tohoku region are hedging against risk by opting to purchase farmers income insurance, which makes up for losses to their earnings.

The insurance covers nearly all agricultural products as well as losses resulting from a wide range of circumstances such as lower yields due to typhoons and heavy rain, falling market prices, bankruptcy of business partners and the effects of the coronavirus pandemic.

The prefectural governments and agricultural cooperatives of Akita, Aomori, Miyagi, Iwate, Fukushima and Yamagata are encouraging farmers to purchase the insurance policy.

According to the Ministry of Agriculture, Forestry and Fisheries, the number of purchased insurance policies as of May 2021 stood at 13,732, while the total amount of insurance premiums paid in the six prefectures totaled ¥2.49 billion in 2020, about 1.5 times higher than in the previous year for both figures.

“The subscription rate is relatively high in and around the city of Hirosaki, which is known for apple production,” said an official with an agricultural insurance association in Aomori Prefecture, which has the largest number of subscribers in the region.

The season's first auction of apples in Hirosaki, Aomori Prefecture on Aug. 3 | KAHOKU SHIMPO
The season’s first auction of apples in Hirosaki, Aomori Prefecture on Aug. 3 | KAHOKU SHIMPO

“Many farmers probably feel it is more beneficial than the mutual aid for fruit farmers that covers losses from natural disasters,” said the official.

Operated by the National Federation of Agricultural Cooperative Associations, the income insurance policy was introduced in January 2019 as one of the pillars of then-Prime Minister Shinzo Abe’s agricultural reforms.

Individual and corporate farmers are eligible to join, and they pay premiums based on their income over the past five years, as well as making contributions to a reserve fund and administrative costs. The government, meanwhile, subsidizes 50% of the premiums and administrative costs and 75% of the reserve fund.

However, the insurance does not cover losses to livestock for beef, pork and eggs, as they are already covered by a separate government subsidy. Those who are covered by a similar insurance scheme are not eligible.

If income falls below 90%, farmers will be paid up to 90% of the amount they’ve lost. For instance, if a farmer has an annual income of ¥10 million, he or she gets up to ¥8.1 million if they pay ¥78,000 for the premium, ¥225,000 to the reserve fund and ¥22,000 for administrative costs.

Marusen Farm Co., which produces tomatoes, spinach and chrysanthemums in Osaki, Miyagi Prefecture, purchased the insurance policy immediately after it was introduced, in the hope that it would cover losses in the event of a flood.

Soon after in October 2019, the farm was flooded up to 3 meters due to heavy rain from Typhoon Hagibis. In 2020, Marusen was unable to plant crops for a period of time, which resulted in a 40% drop in income.

During that time, Takuya Chiba, 48, the company’s president, received an interest-free bridge loan available from the insurance policy, which covered the losses until he received the benefits, enabling him to continue his business.

“In the case of a major natural disaster, it takes at least two to three years to fully recover,” Chiba said. “It was a big help for us and our cash flow.”

According to Miyagi Prefecture’s agricultural insurance association, as of the end of June, it had paid a total of ¥406.5 million in benefits to farmers in the prefecture for crops harvested in 2020.

The losses resulted from retailers closing due to the pandemic, prices declining due to sluggish demand, extended rainfall and low temperatures. By category, vegetables accounted for the largest share of products covered by the insurance, followed by rice and flower crops.

On July 15, Miyagi’s agricultural insurance association and the Sendai branch of the government-affiliated Japan Finance Corp. (JFC), which provides financial support to small and midsize enterprises, signed a memorandum of understanding in order to promote the adoption of agricultural insurance.

“Mutual aid covers natural disasters but farmer’s income insurance covers economic damage and sluggish sales caused by the pandemic as well,” stressed Kei Sato, president of the association.

JFC’s Hajime Shigiya added, “We want to help farmers maintain and develop their businesses through the promotion of income insurance and loans.”

This section features topics and issues from the Tohoku region covered by the Kahoku Shimpo, the largest newspaper in Tohoku. The original article was published Aug. 10.

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