“The Bill for Partial Amendment to the Agricultural Land Act” which was to be implemented in December 2009, deregulates the farmland leasing scheme under certain conditions. This Bill makes it easier to start a farming operation by allowing corporations other than “agricultural production corporations,” as well as non-farmers, to lease farmland.
This amendment would bring a large number of new entrants to farming from the non-agricultural sector, despite the fact that entry through ownership is still prohibited.
The problem of entering farming from the non-agricultural sector has often been discussed in the context of farmland use schemes. However, judging from the realities of such entry, several viewpoints have been lacking, such as how agricultural management should be understood, including the role of such factors as farmland, labor, and technologies, or how we should support operations that have entered farming.
On April, 2007, the government’s Headquarters for the Promotion of Policies for Food, Agriculture and Rural Areas approved the “New Agricultural Policy for the 21 Century,” which aimed at raising the number of corporations entering farming other than “agricultural corporations” up to 500 by the end of FY2010. On 1 March, 2009, 349 corporations had begun engaging in farming through leasing farmland, including 125 from the construction sector and 72 from the food business sector.
At first, such entry was encouraged mainly for the aims of revitalizing rural areas, reusing abandoned farmland, as well as reforming the construction sector, which has been affected by the reduction in public investment projects.
A more recent feature has been an acceleration of farming entry due to a desire to obtain sufficient amount of food materials or PB agricultural products. However, such a tendency should be recognized as a movement of change in agricultural structure underlying the production, marketing and consumption of agricultural products.
According to a survey conducted in June 2008 by “The Association of Farming Entrants Corporations” (“Nogyo Sannyu Hojin Renraku Kyogikai”) and the National Chamber of Agriculture, not a few corporations have had some trouble in the farming operations. The problems are as follows:
1) while farm management size is different for each corporation, corporations which have a plan to enlarge their leased acreage are characterized by the establishment of cultural techniques, organization of marketing channels, and above all, their future prospect.
2) more than half of the responding corporations were in the red, but they still have a commitment to continuing agriculture, without thought of profit, in order to keep workers employed and to procure food materials.
3) even corporations operating at a deficit are improving their management, with higher productivity achieved through marketing channels and supported by subsidies.
Under the Diet’s deliberations of the Agricultural Land Act, several authorization conditions have been added to the Act in order to promote rural community development and appropriate land use.
Under the new scheme, farming entrants from non-agricultural sectors would increase in number, and corporations would have more options in how they entered into agricultural production. This means that management problems would be more highlighted and securing more continuous and sustainable profit would be a key issue. In this context, we realize that such problems almost are the same as present farm management.

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The purpose of this presentation is to introduce the developing processes of First Farm Corporation, a leading company that entered agriculture from the non-agricultural sector in Uragawara district, Joetsu city, Niigata prefecture, where it snows heavily and farm land is located in hilly and mountainous areas. First Farm Corporation was one of the first companies that entered agriculture in 2003 by using the “special district” system, which was established by the government to ease regulations associated with farm land use and acquisition. Because the special district system was a new attempt and such districts were normally approved in less-favored areas, there were some initial technical difficulties and anxieties among local communities. However, thanks to cooperation with local communities (e.g. via elementary schools and agricultural cooperatives), First Farm Corporation climbed into the black in 2008, when the business expanded into a ranch for tourists, cheese and butter making from goat milk, and rice cropping for Japanese sake. For a business like First Farm Corporation to succeed, it is necessary to 1) reconsider land rents and crop rotations because farm land that is allocated to a business entrant from the non-agricultural sector tends to be in less-favored areas and 2) establish a governmental or cooperative system to stabilize cash flow, which is especially volatile during the initial stage. From a social viewpoint, it might be necessary to introduce some regulations for the business not to abandon the less-favored areas that it owns or uses, so that the areas could be kept as well managed by business corporations.

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The Japan Agricultural Cooperative (JA) of Tomisato city stagnated in terms of profitability during 1990s due to a relaxation of regulations on mass retailers. To strengthen their sales competitiveness, JA Tomisato city started expanding its business relationship with processors, consumer cooperatives and restaurants around 2005. In 2008, it established Seven Farm Tomisato Co., Ltd. in cooperation with an individual farm and Ito-Yokado Co., Ltd, which is one of the biggest Japanese supermarket chains. The ratio of capital contribution in Seven Farm Tomisato was 79%, 1%, 10% and 10% for the farm owner, the spouse, JA Tomisato city, and Ito-Yokado Co., Ltd., respectively. Although the capital contribution by the retail giant was not big, the farmers and JA Tomisato city expected that the joint venture would lead to expanded sales and strengthened ties with retailers, and that the farm entry by the retail giant would provide benefits for farm land conservation. JA Tomisato city highly valued the participation of Ito-Yokado members in field work, because as they experienced field work, Ito-Yokado members came to understand field conditions and the labor intensity behind growing vegetables. Such experiences, I believe, would be vital for pricing vegetables at the shops. On the other hand, Ito-Yokado, through farm entry, benefited from a sustainable agricultural system that used compost made from vegetable debris and food residue that came from the shops it owned.

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This paper reviews business models for enterprises that enter into the agricultural sector from other sectors and are successful in their agricultural operations based on theoretically driven case analysis.
For the theoretical approach, I establish an “agro-enterprise value chain” model consisting of eight value activities by modifying the value chain model proposed by Michael Porter for application to agriculture. In addition, five strategies for utilization of internal resources, acquisition of external resources and others, were established as part of the method for understanding the competitive advantage in each value activity.
For the actual case analysis, I selected two small/medium local construction firms. One is the case of Tanaka Kenzai Kogyo, a private limited company mainly engaged in gravel extraction and civil engineering, that entered into a large scale dairy business. The other is the case of Aiki, a company specializing in paving, that started rice production. These cases were analyzed using the “agro-enterprise value chain” theory.
The result of this review showed that successful entrants into the agricultural sector gained certain competitive advantages within the scope of their value chains by using any of the five strategies of competitive advantage establishment. Moreover, it indicated that the methodology of value chain analysis could be applied to improve the management of agricultural business segments, management planning, and management of farms or agricultural entities.

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