Product marketing - Japan style

When I travel around Australia it amazes me how little Australian farmers know about the Japanese market. There are some good ABC programs that give people a guide as to the best approach to these markets. Its not easy because you really need to live there to understand the culture. You will not understand Japan by talking to or employing Japanese sales consultants. There are just too many uncritical thinkers. What I realised about Japanese marketing is just how non-intellectual it is. Certainly huge resources go into design. What I think is not realised is how much of these resources is wasted by a lack of critical thinking. Even the giants like Sony don't really have good design teams. What they do have is have MANY design teams. Living in Tokyo you come to appreciate how many bad products are designed and produced in order to find one that works for the consumer. Of course more resources go into the good designs and the poor designs are dropped. I sense that Sony cut back on its range of products several years ago, and they seem to have fallen into obscurity since. But they clearly recognised the weakness because they established a JV with Ericson.
The food business is a little different. In Japan, the Japanese have long considered lamb to have a too 'gamey' taste for their pallet. This miraculously changed with the rising incidence of mad cow disease, such that lamb is very popular in Japan now. Why the change? Well simply, when US beef was rejected by Asian buyers, the price of beef went up. Japanese importers recognised that they could make higher margins on lamb than beef, and so they started promoting the 'health benefits' of lamb.
As an Australian I grew up having roast lamb 1-2 times a week. It was only recently however that I learned how to get the best possible taste from lamb. If you buy diced lamb pieces from the butcher and cook it in a steamer you will find it has a much nicer taste. I love steaming because I can cook 'hard vegies' like carrots and potato, then after 3-4 minutes I add the 'soft vegies' like broccoli, carrots and peas along with the lamb pieces. The benefit of using lamb pieces is that you can evenly cook the lamb without the steam drying it out. Its easy because you can simply rotate your meat type and retain the vegetables each night.
The Japanese don't seem to eat lamb at home so much. I think they don't know how to cook it. In my case I got into all sorts of problems trying to teach my Japanese ex-wife how to cook it. I was young then, so I warn you, you don't want to say "I'll show you how to cook lamb the way my mother did". I would never have expected to fight over a desire to do the cooking, or fight over lamb, but food is important to the Japanese. :)

Determinants of farm valuation

Like any business the value of a farm comes down to anticipating its future stream of incomes. In assessing those cashflows its normal for the market to go through cycles of under-appreciation of the business value to periods of excessive optimism with respect to farm output. These cycles often relate to speculative cycles based on credit (interest rates), market developments and technological innovation.

When we think about the value of a property we need to consider:
1. Potential farm output: What commodities is the farm able to produce?
2. Potential value add: Are they any opportunities to differentiate the farm product as a premium product in order to extra more farmgate revenues? This might involve further processing prior to shipping, or just better brand definition or recognition.
3. Soil fertility: The productive capacity of a farm depends on natural as well as synthetic inputs.
4. Climate: The climate, whether its a natural dryland climate or a modified (irrigration) climate has a isignificant impact on yields per hectare as well as the number of crops. There is the prospect of climate change changing farm values. Farms in the north of Australia are receiving record prices at auction because of the trend towards higher rainfall in those areas. Its inevitable that greater infrastructure spending in those areas will further increase the value of these lands over time.
5. Risk management: There are a number of risk factors posed to farmers, whether its drought, floods, locusts, rodents, cyclones, bushfire, soil erosion, weed infestations or competing land uses like mining or quarrying. We need to look at strategies to reduce the risk of these elements on our business. Some of these factors are harder to manage than others. Ever-present among these risks is the market price risk. We can of course use various financial instruments to manage these risks, but we need to understand that we are not removing risk, we are changing its form. Financial institutions don't carry risks for free, and when you offload a risk, you accept a different type of risk such as a financial or counter-party risk.
6. Capital requirements: Access to debt or equity finance is particularly important where rainfall is unreliable since a farm needs to be able to finance equipment, land acquisition, overheads and inputs, and be able to meet loan obligations in times of tough climatic conditions.
7. Market dynamics: The fundamentals of the grains and lifestock market have become more complicated. Diets are changing, grains have increasingly been used for fuel production, and the land available for agricultural utilisation is declining.
8. Market Structure: In Australia 98.5% of all farms are in the hands of families. A far greater share of farm capacity however is controlled by large agricultural enterprises. The level of enterprise involvement in farming is higher in other OECD countries, particularly the USA and EC.
9. Water availability: Water is a critical resource determining what products can be produced from a property. Availability is important in two respects: The pricing of water and its reliability as a farm input. Inadequate water can severely impact farm yields.
10. Farm management: Increasingly farming is becoming an increasingly sophisticated business. Despite the growing levels of specialisation in the industry, the agricultural sector largely remains conservatively managed. This is a global factor. Enterprises have had little success penetrating this industry. In some cases, corporations have made progress by buying excess water rights.
11. Commodity prices: Like in all sectors we are concerned with real commodity prices.
12. Farm size: Closer to cities there is a tendency for farms to be broken up into smaller fragments to suit urban development or fringe lifestyles. Maintaining the productive capacity of a farm is the key to productive capacity. Larger farms have greater economies of scale. A farm has value as a going concern, or for higher value applications like urban development. An some point urban development is inevitable for fringe lands.