The economics of food self-sufficiency in Japan : the case of rice and wheat Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/9z903249j

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  • During the two decades 1960-1980 the Japanese government was faced with a problem of declining domestic demand for rice and a persistent over-production which created mounting surpluses stored at public expense. In an attempt to remedy the situation the Japanese government imposed production controls on rice and offered incentives to farmers to grow alternative crops such as wheat. This thesis outlines the Japanese government's concern about food self-sufficiency and how this concern may be reflected in the government's wheat and rice pricing policies. The thesis evaluates the producer and consumer welfare losses due to this pricing policy. The thesis further evaluates associated economic costs of increasing self-sufficiency in wheat through other policy variables including income, producer price and land availability. The impacts on self-sufficiency in rice if Japan were to become 100 percent self sufficient in wheat production are also estimated. The methodology adopted was an extension of Bales and Greenshield's model to evaluate welfare loss. Transportation rates were calculated using a freight rate model developed by Clement. Prices for wheat and rice were derived from Japanese government, Food and Agricultural Organization, and USDA sources. Three methods were used to evaluate the associated cost of increasing self-sufficiency in wheat. The first method estimated the increase in total household income resulting from a one percent increase in the production of rice and wheat. The second determined the increase in the producer price of wheat necessary to equate the incomes of wheat and rice producers. The third method evaluated the potential of achieving 100 percent self-sufficiency in wheat production, and the effects this would have on the self-sufficiency ratio of rice. The study found that as a percent of Japanese Gross Domestic Product, social welfare losses resulting from the self-sufficiency policy were less than one percent for both rice and wheat. As a percentage of total expenditures on the two commodities, however, average welfare losses were 41 percent for rice and 118 percent for wheat. The introduction of the production control program increased the welfare losses for both wheat and rice. Criteria developed to measure the costs of increasing the self-sufficiency in rice found that the potential income from growing rice exceeds that of wheat, despite the production control program and incentives to farmers to grow wheat. The study estimated that producer prices of wheat would have to be raised from ten to five hundred percent to equate rice and wheat producers' incomes. The study also showed that a goal of 100 percent self-sufficiency in wheat production would have been unobtainable in the years following 1962, even if the potential divertable rice land was used for wheat production. The self-sufficiency ratio of rice, however, would remain above 100 percent for all years but three. Thus, it appears that the welfare losses due to the pricing policy are large while the potential to expand the production of wheat is limited under the Japanese policy.
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