Reorganization of Contract Farming Areas under Trade Liberalization and the Overproduction of Agricultural Products: A Case Study of Processing Tomato in Japan

Abstract

In recent years, the producers of agricultural processing products in Japan havebeen forced to reorganize their contract farming areas under the influence of trade liberalization and the overproduction of agricultural products. This paper attempts to make clear the changes in the vertical integration of agricultural production under these impacts, taking the case of contract farming of processing tomato, from a viewpoint of economic geography.Affected by the trade liberalization of agricultural products during the 1960s, the import of tomato raw materials (tomato-paste and tomato-puree) was liberalized in 1972. After that, in addition to the increase of inexpensive foreign raw materials, the excess of raw materials in stock became notable in the latter 1970s, with the declining demand for tomato products. Such a situation forced tomato processing makers (especially Kagome &Co., Ltd. and Japan Del Monte & Co., Ltd.) to undertake drastic reorganization of their domestic producing areas.Because tomato processing makers were obliged to reduce the cost of raw materials with the increasing inflow of foreign raw materials and the overproduction of domestic raw materials, they purchased inexpensive raw materials from abroad and drastically reduced their dependency on expensive domestic raw materials. At the same time, they reorganized their producing areas in three aspects, that is, the reorganization of (1) processing tomato collecting zones, (2) processing plants, (3) contract price. The spatial consequences of these actions were, (1): processing makers withdrew from the prefectures with low productivity and the prefectures distant from the intensified processing plant, (2): processing makers concentrated processing tomatoes to the main tomato juice manufacturing plants, (3): processing makers introduceds a discriminative strategy in contract price based on the transporting cost to processing plant. In short, processing makers carried out the reorganization high-handedly, attaching great importance to cost reduction. However, at the prefectural level, the Prefecture Affiliated Organs of Agri-Coop-Ass'ns played an important role in the control of organizing contract farming areas.Against such behavior by processing makers, contract farmers responded to the situation by abandoning processing tomato cultivation. However, there are considerable regional differences in the decrease of tomato producing areas. A quantitative analysis of 41 processing tomato producing areas in Nagano prefecture revealed that processing tomato cultivation tended to be maintained relatively in areas with unstable agricultural producing conditions, and given up in areas with stable agricultural producing conditions. This is attributed to the characteristics of contract farming:“price stability”, “low profit” and“lack of speculation”. The result is ironic for processing makers, since they always desire stable production of the raw materials.After all, it is shown that the reduction of domestic production by processing makers resulted in production under more unstable farming conditions. In fact, the ageing of contract farmers is very serious and has led to the abandonment of cultivation after the last reduction of producing (carried out in 1988). As a result, domestic raw materials have been short in supply since 1990. Taking this existing situation into consideration, it seems contract farming areas of processing tomato will not be retained over an extended period of time.