Establishing an Agribusiness Model for Future Generations

Nomura Agri Planning & Advisory is helping to industrialize agriculture by utilizing local information obtained from the Nomura Group's nationwide network of 178 head and branch offices and wealth of financial expertise. The company's subsidiary Nomura Farm is working together with agricultural producers' co-operative corporation "wagoen" in Chiba Prefecture, Japan, to build expertise on farm management through growing tomatoes.

Photo: Mr. Hirokazu Kiuchi

Hirokazu Kiuchi
President
Agricultural producers' co-operative corporation "wagoen"

Photo: Mr. Yuuki Takagi

Yuuki Takagi
President (former Administrative Vice-Minister for MAFF)
Japan Professional Agriculture Total Support Organization

Photo: Mr. Takashi Nishizawa

Takashi Nishizawa
President
Nomura Agri Planning & Advisory Co., Ltd.

What are the challenges facing agriculture in Japan?

Agriculture must be seen as a 'food manufacturing industry'

Kiuchi: First of all, one of the challenges facing agriculture today is the shortage of people who view it as a business. Essentially, the definition and concept of 'agriculture' hasn't been made clear among those involved in the industry, including the producers themselves. Agriculture should be seen as a 'food manufacturing industry'. Only after the entire industry recognizes this we will be able to clearly uncover solutions for the many challenges facing agriculture in Japan. We shouldn't speak in a roundabout way about agriculture; rather by shifting it to the category of 'food manufacturing industry' we can see more business-centric perspectives, job creation in local communities and agriculture develop into a key industry for future generations.

Japan's other manufacturing industries, such as the electronics and automotive industries, each began by supplying products to domestic markets and then established a foundation by supplying products to international markets. Today, these industries are moving production sites offshore. Japan's agriculture has still yet to be positioned as a 'food manufacturing industry', but younger farmers are finally beginning to usher in a revolution in thinking. To catch up with other manufacturing industries, agriculture must establish a stable distribution network for domestic markets and at the same time strive to open new international markets. In this regard, I believe agriculture is facing a time of great change.

There is a need for 'sustainable agribusiness entities'

Takagi:Japan's agriculture in the post-war period has been supported by four major pillars, including the food control system, farmland system, agricultural cooperative system and Agricultural Basic Act. This has enabled 6 million farmers to cultivate rice, more efficiently accumulate their crops nationwide through agricultural coops, and fairly distribute these crops to the people of Japan. For a time, this system was an excellent system that served the needs of Japan in the post-war period. Even though times have changed greatly, the attitudes of people involved in agriculture, including local governments, remain largely static. Nearly all rice farmers still think that rice should and will forever be protected by the national government. This is why industrialization hasn't made progress and a business management perspective remains to be seen. Business management requires you to think about not only creating things, but also processing and selling. In other words, agriculture needs a business and management perspective. This is the major challenge facing agriculture in Japan today.

In order to sustain agriculture as an industry, we need to increase the number of people that engage in agriculture with a business management perspective where they take on risk and seek out returns. Our NPO, the J-PAO, exists to increase the number of 'sustainable agribusiness entities', or 'professional farmers' as I call them. Today's society requires people that are seeking to establish this type of sustainable agribusiness. If this trend aligns with consumer needs, then government systems and mechanisms will be forced to follow suit.

In recent years, despite the back and forth, we are moving in a direction of agricultural 'business management', so the only thing left is to speed up this process. This is why we need to provide an environment that rewards the efforts of agribusiness-persons that are working to change agriculture into an integrated industry with originality combining the selling, planning and product development competencies of business persons with farmland, people and technologies. In other words, I believe we need to create a law that provides comprehensive support to sustainable agribusiness entities. This also means changing Japan's conventional protectionist systems and programs to ones that focus on business management and industry.

What is needed to resolve these challenges?

Leveraging Japan's strengths in food to develop an industry that generates benefits for the entire country

Kiuchi:I believe there are two ways for Japan's agribusiness to compete in international markets. First is the American model where the right crop for the right land is used to achieve unrivaled competiveness. Second is the exact opposite model involving planning and providing forward-looking, exciting products that meet the needs of consumers. I believe that without these two extremes agriculture won't be able to compete as an industry. The area between these two extremes won't result in profits. Fortunately, Japan is one of the world's leading countries in terms of its diverse food culture and expertise in food and health, as evidenced by the country's healthy diet and medical foods. However, the problem is that these strengths are largely unknown among consumers and other industries.

For example, fruit tomatoes grown by Nomura Wago Farm can be likened to precision machinery made by the manufacturing industry, as they are said to be the most difficult variety of tomatoes to cultivate. The amazing part of Japanese agriculture is its established technologies that make it possible for someone in finance that has no knowledge whatsoever of agriculture to grow this most difficult variety of tomato. Once the message gets out to the world about these agricultural technologies, we will be able to gather more knowledge from people of many other industries and leverage this for the benefit of Japan's agriculture. In turn, we will be able to capture large amounts of foreign currency and develop agriculture into an industry that benefits all of Japan. The strength of Japan's technologies can be found in their specialized nature, which is a trait sought after around the world. By leveraging the expertise and know-how of other industries and establishing an integrated service combining production, processing and distribution, agriculture will be able to make contributions to Japan's national interests.

Other industries should be involved too

Takagi:I believe many of Japan's technologies and its know-how from other industries can and should be widely applied to agriculture. To do so, it will be important to promote interest in agriculture among a larger number of people. Other industries like manufacturing stand to capture new business opportunities if they have technologies that can be applied to agriculture. This stands to be a major benefit, since Japan's domestic market is in the process of shrinking. This is why agriculture and other industries should work together based on a coexistence and co-prosperity approach. This teamwork will inevitably result in greater benefits for both. The basic management level of Japan's agribusiness-persons is quite advanced. Because of their advanced management capabilities, providing and leveraging stimuli from other industries will help the agribusiness become a new industry.

Do you have any expectations, comments, or requests for Nomura?

Emphasis should be placed on quick responses in order to generate a successful business model in a speedier manner

Kiuchi:First of all, I expect the Nomura Group to utilize its strength in worldwide information gathering to validate and assess our ideas, hypotheses, and speculation of the market. Financing is also needed to develop agriculture into a 'food manufacturing industry', as this represents the blood flowing through the veins of industry. I believe one of the strengths of the Nomura Group is its ability to provide comprehensive information and mechanisms on financing.

In addition, I also expect Nomura to serve as a facilitator between a wide range of industries by using its diverse networks across various industries. Already, I have heard of inquiries from other industries interested in entering agriculture through branch offices of the Nomura Group throughout Japan. These inquiries have included opportunities that represent potentially successful businesses, so I think it is important for us to start building a portfolio of successful cases.

On the other hand, if there is one thing I wish to see from the Nomura Group, it would be speed. When cultivating an industry, if too much cost and time is put into establishing a strategic plan and research, it would take too much time to recover investments, even when the industry is established. For this reason, I believe it is important to focus on how to develop a successful business model with little burden in a speedy and responsive manner. Trends in the food industry are constantly evolving. Even if one develops a plan prudently and creates a product carefully, the product may have already passed its so-called expiration date for success. The most valuable timeline within the market is shorter than any other of the Nomura Group's businesses. As a result, in the field of agriculture you simply can't think long and hard about making a product a 100% hit. It is fine to achieve 60% and make the unfulfilled 40% something to improve upon in the future. I hope the Nomura Group will take action based on this principle.

Helping to industrialize the agribusiness by utilizing experiences in agriculture as a management resource

Takagi:A business will surely succeed if it can properly provide what consumers want. However, it is hard for a person in agribusiness to carry out everything involved throughout the entire process. For this very reason, I believe it is crucial to have a system that allows agribusiness-persons to effectively access and utilize the business structure and know-how developed by other industries. Since the Nomura Group has a number of networks and wide knowledge in everything that is business, I hope it will serve as a bridge between agribusiness-persons and a wide range of industries.

I am particularly looking forward to the results of projects such as the one undertaken by Nomura Farm involving collaboration in tomato cultivation. Hands-on experience in agriculture enables know-how to be accumulated for the latest cultivation technologies and negotiation with agricultural landowners or leaseholders. I hope this will become a management resource of Nomura Agri Planning & Advisory and by extension, the Nomura Group. Meanwhile, if we could link the management resources of the Nomura Group with that of farmers, we can establish agriculture as a new business and find business persons that we can work together with. It is interesting to note that such opportunities for business matching come naturally through direct involvement in the agricultural industry through the dissemination of information. I have tremendous expectations of Nomura Agri Planning & Advisory in speeding up the commercialization of the agribusiness. Since the business started just two years ago, it's still too early to say what I want to see from it. Nevertheless, I believe the business will find what's important through firsthand experience in agriculture. I hope the business will come to appreciate the essential elements and overcome barriers in progressing on to the next phase.

Response to Stakeholder Dialogue

Supporting agriculture's industrialization while recognizing regional revitalization as a business opportunity

Nishizawa:Agriculture is an industry deeply rooted in the local community. Revitalizing this important industry will not only enhance local economies and provide demand for financing, but also can become a solution for many of the challenges facing society today, such as Japan's declining birthrate and aging population, economic disparities between regions, food security and environmental issues. Although agriculture faces many challenges, Nomura believes that this means there are also many opportunities to revitalize regional economies. Regional revitalization and the international expansion of Japan's agribusiness represent major business opportunities for Nomura. I hope to contribute to the industrialization of agriculture more quickly by leveraging the financial expertise from our core business, our domestic and international network and the know-how gained from our business experiences in agriculture.

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