Thursday, April 16, 2009

The Prospective Farming Boom: The Japan Experience

Legendary investor Jim Rogers has repeatedly predicted that participants of the next global sunshine industry would be driving Lamborghinis and Maseratis will be mostly farmers.

In Japan, farming appears to be on a verge to a boom but NOT because of demand-supply disparities as seen through rising commodity prices YET. But because farming seems to be a dying industry (again validating the view that the age long neglect of the industry has been contributing to global supply pressures) and presently benefiting from the recessionary pressures in their economy- farming is one of the industries that has the capability to absorb displaced and idled workers from the recent crisis.

All pictures from Wall Street Journal, slide show here

This from the Wall Street Journal, (all bold highlights mine)…

``As the global financial crisis sinks Japan into its worst recession since World War II and hundreds of thousands of jobs are slashed in factories and offices, farming has emerged as a promising new career track. "Agriculture Will Save Japan," blared a headline for a business weekly magazine. Farmer's Kitchen, a popular new Tokyo restaurant, plasters its walls with posters of hunky farmers who supply the eatery with organic vegetables.

``Seeing agriculture as one of the few industries that could generate jobs right now, the government has earmarked $10 million to send 900 people to job-training programs in farming, forestry and fishing. Japan's unemployment rate was 4.4% in February, up from 3.9% a year earlier, but still lower than the U.S. or Europe. Some economists expect the figure to rise to a record 8% or so within the next couple of years.

``Policy makers are hoping newly unemployed young people will help revive Japan's dwindling farming population, where two in three full-time farmers are 65 or older. Of Japan's total population, 6% work in agriculture, most doing so only part time, down from about 20% three decades ago.

``"If they can't find young workers over the next several years, Japan's agriculture will disappear," said Kazumasa Iwata, a government economist and former deputy governor of the Bank of Japan.

Of course a radical shift in the economy export driven environment has brought about a resistance to change in terms of work attitude.

Again from the same WSJ article,

``Despite the popularity of the training programs and of the government's longer, one-year farm internships, many young people end up returning to cities, unable to adjust to life in the countryside. Last year, Fukiko Oshiro, a farmer in western Okayama prefecture, hired five workers from cities like Osaka, including a couple of former salesmen, to work at her nursery and fruit farm. She said she has already lost three of them.

``"These young people think it's their right to come and impose on us," said Ms. Oshiro as she surveyed her busy farm stand recently. "They have no idea how much work we put in to teach them."

``Since the beginning of the year, said Ms. Oshiro, her farm has received a flood of résumés from people affected by the recession, including some let go from a nearby assembly plant of Mitsubishi Motors Corp. While Ms. Oshiro needs more workers for her expanding farm, she doesn't have high expectations for these applicants.

``"At least people who came before were interested in agriculture," the 49-year-old said. "These new applicants are coming because they have no other choice."

All these simply show how resources misused in the previous unsustainable policy induced booms which are released from the present contracting activities and are being transferred into previously underinvested but are today's expanding industries.

Finally as to bust turning into a boom relative to labor, here is a description from John Cochran and Noah Yetter in Capital in Disequilibrium: An Austrian Approach to Recession and Recovery (bold emphasis mine)

``The reallocation of labor develops in much the same fashion as the reallocation of capital. Firms realize they have employed labor in a pattern inconsistent with consumer preferences, and this labor is then liquidated (i.e.: workers are laid off). It must be remembered that labor has specificity just like capital does, and it likely will not do to offer workers pay cuts when the type of labor services those workers provide is realized to be wholly inappropriate (viz. consumer preferences)….Unfortunately for workers, it is difficult for the economy to reallocate labor until it has already reallocated capital. That is, though firms are realizing their errors and adjusting production plans to once again coincide with consumer preferences, labor employment in sectors towards which activity is being directed is not likely to be strong until the necessary capital is in place to complement it.”

Until more capital is promptly reallocated towards farming where the benefits will be strongly felt, the present recovery will likely be muted.

Nonetheless, the torrent of global government spending ensures that this phenomenon will likely accelerate.

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