Abstract
Soon after trade liberalization in the late 1980s, a flurry of Japanese firms entered the Australian beef sector by adopting a develop-and-import scheme. They established feedlots and abattoirs to provide chilled long-term grain-fed beef for Japanese household consumption. Twenty years later, the volume of beef imported from Australia has more than doubled, but most Japanese firms have divested themselves of their operations.
The purpose of this paper is to investigate the transition of industry arrangements in Japan–Australia beef trade over the past two decades. Initially, Japanese upstream investment was introduced under the following conditions: 1) Japan had a huge but unique market for long-term grain-fed beef. 2) Australia had the potential for low-cost production, but 3) Australian firms did not have sufficient ability to produce and market grain-fed beef. However, those conditions have changed through various pathways. This paper explains the transition in terms of the changes in market environments, production conditions, and different abilities between Japanese and Australian firms focusing on the firms' behaviors.
From the late 1980s, the rush of beef imports through Japanese upstream investment resulted in a price decline of nearly 50%. Although the price decline spurred Japanese beef consumption, it was only the food service sector that expanded and household consumption shrunk to the preliberalization level caused by beef-related food scares in 1996 and 2001. In the household consumption sector, the demand for imported long-term grain-fed beef declined as domestic dairy steers became more competitive in quality and cost. Instead, demand for the short-term grain-fed beef grew in both Australian and other Asian markets, especially from the 2000s.
Meanwhile, the conditions for low-cost production deteriorated in Australia. The increase in feedlots along with the occasional drought doubled or tripled feed grain prices from the late 1990s. The price gap including wages also diminished as a result of the booming economy in Australia in contrast to the prolonged recession in Japan.
Furthermore, Japanese firms faced competitive pressures from Australian rivals, especially from US-owned multinationals. From the mid-1990s, the Australian beef sector was modernized through rapid investments by US conglomerates such as Cargill and Swift. In addition, the demand shift for grain-fed beef not only decreased the significance of the unique Japanese long-term feeding technique but also gave their Australian rivals the advantage of a broader sales network.
The transition of the Japan–Australia beef arrangement reflects the characteristics of the commodity. Although Japan had unique consumption and production preferences for long-term grain-fed beef, beef is a highly globalized commodity under US dominance. The production was easy to catch up with technically and financially, and the market tended to expand globally. However, the transition also reflects the broader background to Japanese food sourcing: an expanding food service industry; diffusion of Japanese food culture; and lower buying power of Japan.
