Rice prices are falling. This may be good news for consumers, but it will cause problems. Because the Democratic Party of Japan government has started the policy of income compensation for individual farmers, sharp decreases in rice prices could make operation of the compensation program difficult.
Rice farmers whose production costs constantly exceed the sale price can join the income compensation system. If they agree to reduce the area of rice paddies to grow other crops like wheat, the government will pay ¥15,000 per 10 ares (1 are equals 100 sq. meters) of rice paddies. If the rice price falls below the three-year average of rice prices, there will be an additional payment that is equal to the difference.
The farmers' average price of rice that was produced in 2009 and now has been consumed was about ¥14,000 per bale (60 kg of rice), some ¥1,000 lower than in the fall of 2009. To make matters worse, a good harvest is expected this year. Rice stockpiles by the government and farmers' cooperatives already amount to more than 3 million tons, equivalent to nearly 40 percent of rice yearly consumed. A further fall in rice prices appears inevitable.