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Export Study - Chapter 4: Asia - Organic Trade Association
Organic Trade Association
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Export Study - Chapter 4: Asia

 

The amount of information available on the Asian organic markets is in no way comparable with the information available from the countries of the European Union. Generally speaking, almost all domestic markets in Asia are small, and in many cases organic agriculture is seen more as a chance for bolstering exports than develop an healthy alternative in agriculture. Major exporters are China, India, the Republic of Korea, and Sri Lanka. Israel and Turkey are also major exporters, but exceptions insofar as their economy is more linked to Europe than to Asia. Both countries have grown into major suppliers for the EU in the last five years.


There are some countries, however, where a domestic organic market is just emerging, among them China, India, the Philippines, Malaysia, and Singapore. To date only Japan has established a legal basis for its organic agriculture in the form of a national organic standard. Some other countries are working on setting organic standards, among them China, the Philippines, Thailand and Malaysia.


4. 1 Japan

4.1.1.Development of Organic Agriculture

Asian countries and Japan specifically, have a long-standing tradition in practicing appropriate, environmentally friendly forms of agriculture. There are various different systems of sustainable agriculture being applied, and in the Western World the best known is the Fukuoka system, although Fukuoka’s agricultural philosophy and methods have not been received specifically enthusiastic in his home country Japan.


Up to the recent enacting of the national Organic Standards on June 10th, 2000 organic agriculture as defined by internationally accepted standards such as those of IFOAM and certified by an independent third party had not been very well developed. In 1992 the Japanese Ministry of Agriculture, Forestry and Fisheries (MAFF) issued voluntary guidelines on sustainable agriculture which did not require third-party certification. These guidelines described the following categories of production:

  1. "Organic", where no chemicals have been used for more than three years
  2. "Organic in transition", where no chemicals have been used for a period between 6 months and 3 years
  3. "No pesticides" for products on which no chemical pesticides have been used
  4. "Reduced pesticides", where the use of chemical pesticides is reduced more than 50% of the average pesticide application
  5. "No chemical fertilizer grown" for products grown without chemical fertilizers,
  6. "Reduced fertilizer grown" for products where the use of chemical fertilizers is reduced to less than 50% of the average fertilizer use. [21,31]

However, the above described categories under the voluntary MAFF guidelines led to substantial confusion as to what rightly can be claimed organic agriculture or products grown and processed according to proper organic standards. A MAFF survey in 1991 of 1,459 so-called organic farming households showed that only 32% practiced chemical-free farming; the remaining 68% were classified as practicing "reduced use of agro-chemicals" [31].


According to Willer [41], in 1999 only 0.1% or 12,500 acres of the total arable land in Japan was under organic management. This number seems incredibly low, especially if compared to the total organic retail market size of $1.5-3 billion in 1999 as estimated by different sources (for further discussion of this point, see next chapter). As third party organic certification has been introduced relatively recently, we assume that this number encompasses only the acreage which was under voluntary third party certification in the fall of 1999, and that with the introduction of the national organic standard the independently certified organic acreage stands to rise substantially.


4.1.2 Infrastructure of the Organic Industry

4.1.2.1 Processing, Distribution and Wholesaling

In the processing sector, Japanese companies are specifically known for the production of specialties such as miso (soy condiment), mochi (dried paste of steamed rice), Asian noodles like ramen, soba, and udon, pickles and fermented apricots, sake, soy sauces like tamari and shoyu. These type of products are exported worldwide by companies such as Muso and Mitoku. In addition, now popular products such as rice cakes, soymilk, and tofu originated in Japan.


There are numerous small traditional organic processors and manufactures, but no exact numbers are available. YHK Yume Hyakusai Kyowakuku is a processing company of organic foodstuffs, and there are also old established companies like Hatcho Miso Company or the Sendai Company, which have developed their own organic lines.


Asahi
Foods, Japan’s ninth largest food wholesaler, was the first major conventional wholesaler to move into the organic business. The company also imports directly from the United States.


4.1.2.2 The Retail Market

The retail value of the organic market is not very well established. Kortbech et al. estimate the value of organic retail sales in 1998 as $1.3-1.5 billion. Masuda [26] cites an unnamed research report estimating the total retail value of the Japanese organic market in 1999 as approaching $3 billion, including all six categories of organic and reduced chemical fertilizer and low pesticide input as described in chapter 4.1.2.1. According to Setboonsarng and Gilham [31] citing the Japanese External Trade Organization (JETRO) the organic market’s retail value rose from app. $1 billion in 1995 to $1.8 billion in 1996 to $2.5 billion in 1997. These numbers would account for growth rates of 80% and in 1996 and 39% in 1997. As mentioned earlier, these numbers do not correspond very well with the 12,500 acres under organic management as given by Willer [41]. Assuming that this is the "pure" third-party certified organic acreage, and further assuming that every acre under organic management results in an average $10,000 retail value annually, this would account for annual retail sales of $125 million. Sogo Market Research [21] estimated total organic food imports to Japan in 1999 at $90 million, and taking into account a mark-up of 150%, this would account for an additional $225 million retail value, totaling $350 million in retail value, only a fraction of the aforementioned estimates for the size of the organic retail market. To shed light on these numbers from another angle: Germany, with retail sales in the range of $2 billion, has some 1 million acres under organic management, 80 times the organic acreage that is estimated for Japan. From these numbers, it can be assumed that there is a large gray zone of products, which may be produced with low chemical pesticide and fertilizer input, but not adherent to strict organic standards.


The price premium of organic products is reportedly in many cases twice to three times as high as that of comparable conventional products, which would also be an indication of a relative immature market. In comparison, the average European organic price premium is somewhere between 20 and 50%.


Not much information is available on the specific distribution channels for organic products. The early beginnings are marked by the Tekei alternative marketing network coordinated by two groups: the Japan Organic Agriculture Association, established in 1971; and the Nature Farming International Research Foundation. Today, natural farm produce is sold at many grocery stores, health food shops and supermarkets. The Jusko retail group started carrying the French La Vie brand some years ago.


There are only very general numbers available for breakdown of products sold. The portion of fresh produce is estimated between 65% and 75%, that of rice between 10% and 15%, and the share of processed foods seems presently fairly low, between 1 and 3 % of the total retail value.


No exact numbers on organic amounts or types of products are available from Japanese authorities. According to the Sogo market research firm total value of organic imports to Japan is $90 million. Also, no reliable numbers on underserviced product areas are available.


4.1.3 Infrastructure of the Import Market

Imports into Japan are handled by specialized import companies, most of which also deal in conventional products. For Japan it is essential to connect with a well-established import firm, as this is basically the only way to get access to the market. Companies active in importing organic commodities are Muso Company, Japan Agritech, Nature Farming Commercial Cooperative Organization, and Sugai International Incorporated, and the aforementioned food wholesaler Asahi Foods.


No information is available on consumer buying patterns and attitudes toward organic products.


4.1.3.2 US Products Exported to Japan

Table 15: List of US Organic Products Exported to Japan

Fresh vegetables

Fruit

Cereals & Pulses

Processed food

Beverages

Carrots

Apple

Wild rice

Muesli

Herbal teas

Peppers

Grapes

Basmati rice

Granola

Apple juice

Broccoli

Oranges

Wheat

Trail Mix

Tomato juice

Basil

Raisins

Durum Wheat

Cookies

Orange juice

Oregano

Lemons

Wheat flour

Chocolate

Red wine

Rosemary

Blueberries

Oats

Olive oil

White wine

Thyme

Grapefruit

Soybeans

Sunflower oil

 

 

 

 

Salad dressings

 

 

 

 

Chicken

 

 

 

 

Various frozen vegetables

 

 

 

 

Butter

Cheese

 

 

 

 

Spirulina

 

 

 

 

Frozen yogurt

 

 

 

 

Frozen fruits

 

 

 

 

Pasta

 

Source: Organic Insights


The list above (table 15) gives an impression of the products exported to Japan. It is not possible to make reliable estimates on single product categories, but soybean and corn are the preferred export commodities to Japan. Estimates on total organic exports to Japan range from $40 million to $60 million, and growth rates between 30% and 50%. It should be noted, however, that those growth rates differ substantially from commodity to commodity, with some showing only very modest or no growth at all. It appears that Japan and the UK are the main target countries for organic exports from the US. In general, trade sources expect a pronounced increase in organic trade with Japan through the recently enacted Japanese National Organic Standards


4.1.4 Trends and Conclusions

Although the published data regarding the size of the Japanese organic market are inconclusive, there is no doubt that it is one of the major organic markets worldwide. Furthermore, it is also clear that the domestic organic market is in an expansion phase. The biggest unknown factor with respect to its future development is the impact of the recently implemented National Organic Standards, especially in the light of the hitherto very blurry guidelines, and the consumer reaction to this development. Different scenarios of consumer reactions can be envisioned. In the best possible case for the organic industry, consumers will trust and heavily rely on the organic standards and prefer to buy products grown and processed according to the newly implemented organic rules. In this case, a substantial portion of the products that are hitherto grown and processed in a gray zone would have either to be converted to the full-fledged organic standards or replaced by products grown according to organic standards. In a worst-case scenario, consumers of products that are presently not certified may not be willing to pay the price differential for certified foods, thereby stifling the development of organic trade. Of course, most probably something in between will happen: some will switch, some will remain loyal to their "reduced chemical input products".


Nevertheless, we do think that generally the approach of setting appropriate standards and making the market more transparent is a reaction to an expressed demand and will have consequences and corollaries, surely resulting in further growth of the organic market in Japan. Japan’s current growth rate as well as the high price premium paid for organic food make Japan a prime target for US organic exports, provided that the problems with organic import certifications can be ironed out fairly soon.


4.2 Taiwan

Organic agriculture is a very recent development in Taiwan, and very few farmers have converted to organic. In 1999, the total organic acreage was 3,060 acres, up from 1,500 in the year 1997. Main products are rice (1,300 acres), tree fruits, (400 acres), tea (200 acres), vegetables (750 acres), and various other products on the remaining acreage.


Taiwan has become, in only a few years, one of the emerging Asian organic markets with a sales volume worth mentioning. A current estimate by a local food company indicates that Taiwan’s food imports are currently worth $9.7 million [38], while other trade sources estimate the import volume somewhat higher, between $10 and 12 million in 1999. It is estimated that between 80% and 90% of these imports originate in the US, accounting for an export volume of roughly $8 million.


As the organic acreage in Taiwan is only 3,060 acres, it can be estimated that the total retail value of the organic market is currently not more than $50 million. Trade sources expect retail sales to increase 30% annually over the next 5 years.


Because of this low market volume, there is no established infrastructure of the organic industry in Taiwan. According to a FAS GAIN report [38], there are approximately 1,000 specialist shops for organic and natural foods, whose individual gross sales are very low. In addition, some 58 of Taiwan’s 839 supermarkets also carry some organic products, and one major Taiwanese supermarket chain, Sinon, is planning to set up organic sections in 4 of its 18 stores.


One of the first organic importers and distributors was the Organic World Corporation. The company imports organic goods from all over the world, including Australia, France, Germany, Japan, and the United States. Organic World reportedly has its own stores, about 30, to sell its products. In 1999 a new organic food retailer, Uni-President Organic, was created, a cooperation between President Enterprises, Taiwan’s biggest food company, and Santa Cruz International, reportedly the biggest organic food importer and distributor.


On of the characteristics of an immature organic market system is the steep price differential between conventional and organic products. In the case of Taiwan, fresh produce it is reportedly 3 to 4 times as expensive as conventional produce and groceries and organic rice roughly. twice as expensive as their conventional counterparts.


Taiwan with its high organic price level and the fast growth of its market will certainly become an even more interesting target for US organic exporters in the years to come.

Table 16 gives an impression of the currently exported products to Taiwan.


Table 16
: List of US Organic Products Exported to Taiwan

Fresh vegetables and herbs

Fruit

Cereals & Pulses

Processed food

Beverages

Carrots

Apple

Rice

Olive oil

Herbal teas

Peppers

Grapes

Wild rice

Sunflower oil

Apple juice

Broccoli

Oranges

Black glutinous rice

Salad dressings

Tomato juice

Onions

Grapefruit

Wheat

Durum

Soy sauce

Various vegetable juices

Potatoes

Dates

Wheat flour

Miso

Red wine

Basil

Oregano

Rosemary

Thyme

Plums (dried)

Oats

Spirulina

White wine

 

Raisins

Soybeans

Dulse flakes

 

Source: GAIN Report # TW0008 [38], Organic Insights

 
 
2014 Annual Fund

Research and Promotion 2012

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