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Current methods of price formation for new-demand rice distribution and relevant issues

Abstract

This study uses transaction cost theory to analyze the market of rice whole crop silage (RWCS) and obtained the following two results. First, the institutional environment of RWCS market has an effect on transaction costs. The negative influence of RWCS is higher than that of rice for forage. This tendency corresponds to the manner in which livestock farmers get feed. Second, the RWCS market in the city of Katori shows the validity of an intermediate organization for efficient production utilization system. The intermediate organization in the city of Katori mainly serves to reduce transaction costs, which cannot be easily achieved individually. An intermediate organization can process complicated product information similarly and simplify the deal process. The city of Katori and Chiba-ken takes on the roles of providing policy explanations, offering technical information, matching suppliers with buyers, etc. Support from the reliable intermediate organization of the city of Katori and Chiba-ken enabled farmers in the city of Katori to invest in a Total Mixed Rations center and use paddy fields effectively. The price of RWCS in this area is insensitive to the price of both rice and imported feed. One factor behind this unresponsive pricing is the intermediate organization, which works as a system through which rice and livestock farmers obtain long-term benefits. The harmonious RWCS market system in the city of Katori rests on solidarity among rice farmers, livestock farmers, and the local government which strategically deals with the institutional environment.

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Notes

  1. This is used in payment by volume.

  2. The feed companies and groups of producers/users were interviewed about quality standards.

  3. Because of their gizzards, chickens can also be fed unhulled rice.

  4. This refers to both breeding cattle and their calves.

  5. These are multiparous cows and cows for birthing calves in Stock Grower Statistics (2012) that correspond to milk cows and calves in the Agricultural Operations Statistical Survey.

  6. According to MAFF, feed volume used (livestock feed), which is the basis of calculation in the Agricultural Operations Statistical Survey, is actually the amount of feed given.

  7. Subsidies are essential in RWCS production.

  8. Average yields of dry feed per unit area are taken from Yoshida (2010). Water content is assumed to be 65 %, the commonly used percentage in producer/user manuals, etc.

  9. Feed rice production area continued to expand until 2012. In 2013, the area dropped to 12,563 hectares but rebounded to 11,972 hectares. MAFF and media reports attributed the drop to crop growers’ choosing to produce rice for storage and processing in 2013 based on their higher returns. However, this explanation does not explain the solid increase in RWCS production areas in 2013, which were subsidized at the same level. No studies have thus far explained the reasons for the contemporaneous decline in feed rice production and increase in RWCS production in 2013, but an approach that focuses on agricultural management and production organizations as well as their differences in transaction costs may facilitate a rational explanation.

  10. Based on interviews with the Katori AAD.

  11. The Council promotes RWCS quality enhancement by drying fields prior to harvest and not harvesting during rainfall. However, some fields at harvest may not be sufficiently dry, which causes the soil to adhere to the crops and hinders proper fermentation, negatively affecting the product quality, though it can still be adequate as livestock feed. In this case, the product is given a B-grade, and priced at 7–10 yen per kilogram.

  12. Based on interviews with the Katori AAD.

  13. In the first round of standard transaction prices, the decision-making process is based on interviews at the Katori AAD as well as data provided by the Department and Council.

  14. This is a quote from the first conference official meeting held on March 24, 2010.

  15. Based on interviews with the Katori AAD.

  16. Based on MAFF’s The Situation Surrounding Livestock Feed (September 2014).

  17. Based on MAFF’s Relative Transaction Prices and Average Prices by Annual Production.

  18. This is based on comprehensive data on 2013 RWCS purchasers provided by the city of Katori.

  19. Data extracted from a questionnaire by the Chiba-ken Katori agricultural branch office during a conference. This investigation was done in September and October 2013 at 11 houses of dairy farming management and beef cow management.

  20. This suggests the possibility of using survey responses as a tool in price negotiation.

  21. This word is based on the survey result of footnote 20. The choices were high, reasonable, and cheap for a stock raising farmer.

  22. On the disparities in demand for RWCS by type of livestock or cattle, see Hiraji and Senda (2005). Furthermore, according to a survey by the Council of stock growers who used RWCS at the end of 2013 on its palatability, 36 % of dairy farmers rated RWCS as “good,” 46 % as “average,” and 18 % as “bad,” reflecting their preference for highly palatable products. In contrast, 73 % of beef cattle farmers rated RWCS as “good” and 27 % as “average” (there were no “bad” ratings), reflecting their satisfaction with the food varieties.

  23. The total combined production area of both production organizations constitutes more than half of all production areas within Katori City.

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Acknowledgments

The author would like to thank Enago (www.enago.jp) for the English language review.

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Correspondence to Masayuki Ogawa.

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Ogawa, M. Current methods of price formation for new-demand rice distribution and relevant issues. Paddy Water Environ 14, 509–520 (2016). https://doi.org/10.1007/s10333-015-0520-0

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Keywords

  • Rice whole crop silage (RWCS)
  • Market pricing
  • Transaction cost
  • Solidarity