Facing declining milk consumption and financial challenges, Japan’s dairy farmers are increasingly turning to wagyu breeding as a means to sustain their livelihoods. However, the influx of new breeders risks oversupplying the market, potentially driving down wagyu prices further.
In Japan, dairy farmers are shifting to wagyu cattle breeding to survive amidst declining milk consumption and challenging market conditions. Despite Japanese wagyu beef prices being at their lowest in years, these farmers see wagyu breeding as a viable alternative to sustain their income. However, the increasing number of new breeders may lead to an oversupply in the market, further pushing down prices.
According to the Agriculture & Livestock Industries Corp., headquartered in Tokyo, the average price of wagyu calves from Japanese Black cattle was $12.38 per kilogram through July 2024. This represents a 29% decline from fiscal 2021, reflecting a broader drop in wholesale wagyu prices.
Shift in Breeding Dynamics:
Keiji Togawa, a wagyu rancher in Miyazaki city, noted a decline in the number of breeding specialists selling calves at local markets. “Looks like three more quit this month, too,” Togawa observed in mid-August. Despite the price slump, the volume of Japanese Black wagyu calves traded rose to around 367,000 head in fiscal 2023, a 1% increase year-on-year. This growth is largely attributed to dairy farmers transitioning to wagyu breeding.
In Hokkaido’s Tokachi region, dairy farmers are opting to breed wagyu calves by implanting fertilized wagyu embryos into Holstein cows. These calves are typically raised for six to ten months before being sold. Even with the current low market prices, a wagyu calf can still generate a profit of approximately $1,380 after deducting feed and other expenses, according to a local dairy farmer.
Challenges Facing the Dairy Industry:
Japan’s dairy industry faces numerous challenges, including a decline in milk consumption due to the country’s aging and shrinking population. With little hope of market expansion, many dairy farmers have been forced to dispose of surplus milk. In this difficult environment, breeding wagyu calves offers an alternative source of income.
However, the costs associated with wagyu breeding are significant. Wagyu embryos range from $272 to $680, and there is no guarantee that implantation will be successful. Yet, if a wagyu calf reaches about 300 kg after six months, it could sell for approximately $4,091, even in the current sluggish market.
“Demand has remained strong for fertilized Japanese Black wagyu embryos,” said a representative from the Tokachi A.I. Center, a leading supplier in Hokkaido.
Opportunities and Risks for Dairy Farmers:
For many dairy farmers, wagyu calf production is an attractive option. “Wagyu calf production is appealing,” said Yasuhiro Yoshida, a dairy farmer in Saitama Prefecture. “But you can’t do it unless you can afford to invest in a large-scale operation. Between buying the embryos and the cost of feed, raising them is tough.”
Large dairy farms with the ability to leverage economies of scale are better positioned to profit from wagyu breeding. This scenario enables already-strong players to further consolidate their market position. However, if more dairy farmers continue to enter the wagyu breeding business, prices for wagyu calves may continue to decline, exacerbating the economic pressures on smaller farmers.
The Tokachi dairy farmer acknowledged the dilemma, saying, “But we can’t give it up,” underscoring the challenging decisions facing Japan’s dairy farmers in an increasingly competitive market.
As Japan’s dairy farmers navigate these challenging times, many are betting on wagyu breeding as a lifeline. However, the risk of market saturation and declining prices looms large, threatening the profitability of this endeavor. How the market evolves will depend on a delicate balance between supply and demand, and the strategic decisions made by both new and established breeders.
