Aquaponics has arrived in Japan, and is already offering opportunities for training and R&D, with eye on eventually developing a solid commercial market for aquaponically grown products.
Aquaponics is a cyclical organic farming method that is a cross between aquaculture (“aqua”culture) and hydroponics (hydro”ponics”). Microorganisms decompose fish waste and the plants absorb it as nutrients, thus allowing vegetables and fruits to be grown without the use of chemical fertilizers, pesticides, herbicides, or insecticides. With the growing demand for organic vegetables in many markets, there has also been growing global interest in aquaponics.
The main produce usually grown using aquaponics are leafy greens such as lettuce and herbs, which have a short harvest cycle and high profitability. However, if profitability is not the goal, almost any other plant, including fruit, flowers, and ornamental plants can be grown using aquaponic technology
Leafy greens, like the lettuce growing here at Aquponi’s farm in an LED system, is one of the most common vegetables grown with aquaponics. The fish live in the tank in the circular tank on the right.
Aquponi is the first company in Japan specializing in aquaponics and recently, Meros visited Aquponi’s farm in Fujisawa, Kanagawa Prefecture to understand more about what they are planning in Japan and how the industry is developing. Aquponi’s focus is on conducting R&D related to aquaponics, supporting the building of aquaponic farms in Japan as well as selling aquaponics kits for home use. The company aims to promote aquaponics as a sustainable growing system in Japan and providing training to individuals and companies in aquaponics through its Aquaponics Academy with both online and in person courses.. The facilities are also available for companies and universities to conduct research. They offer opportunities to experiment with working with aquaponic systems in greenhouses, using natural sunlight, as well as indoor systems, using LED lighting.
Above: Inspecting the fish tanks in the sunlit greenhouse and a look at the freshwater fish that are an essential part of this system.
However, finding a commercial market for aquaponic produce in Japan is still a challenge. According to Aquponi, the US leads the aquaponic market in both research and industry. In the US, aquaponic vegetables can be labeled as “aquaponic” and sold at a higher price than even regular organic vegetables. While some aquaculture companies and farmers in Japan have experimented with aquaponics, the demand in Japan for organic vegetables is much lower than in the US, and aquaponic vegetables have not yet found a market in Japan.
So while the good news is that aquaponics is gradually gaining recognition in Japan and the cultivation system itself has a variety of potential uses, including educational use in schools and horticultural medical use in hospitals, finding a market for aquaponic vegetables as an value-added product is still a challenge in Japan and is expected to be a longer term project.
The Development Bank of Japan (DBJ) announced on November 19, 2020 that it will become the first Asian investor into US-based agricultural impact fund Equilibrium’s Controlled Environment Foods Fund II. This is Equilibrium’s second fund investing in large-scale controlled environment agriculture.
Meros has been fortunate to work alongside the DBJ team over the past year to help identify international agricultural impact investing trends and their impact on agricultural industries. We have also helped to outline the diverse challenges and investment and financing landscape facing Japanese agriculture that may potentially be addressed by agricultural impact funds in Japan. The last two years in particular have seen increased interest in the importance of impact and ESG investments in international farmland and agriculture supply chain investment, with ever-evolving discussion about how to measure and assess the impact of these investments.
Equilibrium Capital, the Pioneer of Agricultural Impact Fund Investing
Equilibrium is a US impact investment fund management company that creates investment opportunities with a focus on sustainability for institutional investors. The company is currently developing infrastructure investment funds for large-scale environmentally controlled agriculture and agricultural wastewater treatment projects. Founded by Dave Chen in 2008, the company is a pioneer in US impact investing.
In 2018, it launched the , the world’s first impact investment fund dedicated to large-scale, environmentally controlled agriculture, raising US$336 million and within one year, Equilibrium was operating over 100 hectares of greenhouse operations. CEFF II is now its second fund.
Equilibrium aims to create impact at every stage of the project. On the production side, the advantages of controlled environment farming are seen as efficient use of limited farmland, no soil runoff problems, less pesticide use, a better environment for workers compared to open field farming, and higher productivity, while reducing the need for irrigation. In terms of distribution and consumption, the peri-urban location of their greenhouses reduces logistics costs and carbon dioxide emissions in the distribution process, preserving freshness and providing nutritious food, reducing food waste, and improving food safety. The fund’s greenhouse operators are asked to align their businesses with Equilibrium’s goals, which include both growing efficiency and increased yields, as well as compliance with international food safety standards (GFSI) and working with retailers and freshness preservation technology companies to reduce packaging materials.
Development Bank of Japan (DBJ) and Sustainable Investment in Agriculture
By becoming an LP in Equilibrium’s fund, DBJ aims to obtain a deeper understanding of global trends in the agri-food sector, acquire advanced know-how, and contribute to the future growth of Japan’s domestic agricultural and food industries by sharing the knowledge gained from this investment with industries in Japan. Mr. Takuya Ogawa, Director of Corporate Finance Department 3, a core member of the DBJ team, commented: “We hope to achieve a more sustainable society through financial support to the food and agriculture sector and gain a deeper understanding of sustainable agriculture as advocated by Equilibrium and CEFF II.
As a government-funded financial institution, DBJ’s mission is to act in the public interest when selecting investments, and thus has a strong affinity with Equilibrium’s mission, sharing a philosophy of sustainable environmental, labor and social structures along the food chain, and impact investing in the food and agriculture sector.
Japanese Institutional Investors Already Moving into ESG Investing in Food, Agriculture and Farmland
While DBJ is the first to invest in an agricultural impact fund, Japanese institutional investors have already been moving into farmland investment. Nippon Life’s announcement in 2018 of an investment of approximately 10 billion yen in an overseas farmland investment fund managed by Hancock Natural Resources, a member of Manulife Life Group, is believed to be the first farmland fund deal by an Japanese institutional investor. According to their press release, Nippon Life Insurance expressed interest in how the fund can contribute to stable food supply through the environmentally friendly operations of farmland. The investment was positioned as an initiative within Nippon Life’s ESG-related investments and loans which total 200 billion yen. Hancock Natural Resource Group has a long history of investing in farmland, but in recent years, it has been focusing on more on sustainable practices in farmland operations, and in January of 2020, it announced the development of an ESG evaluation criteria for farmland operations, called Leading Harvest, together with several other large farmland investment funds.
As awareness of both ESG investing and impact investing grow in Japan, we look forward to Japan’s leading investors increasingly playing a role in global impact funds and bringing the lessons of sustainable farmland operations and impact investing to address Japan’s own agricultural challenges.
In honor of “CSA Day” today February 22, I thought I would share some observations from my recent exploration into the community supported agriculture movement in China. I am familiar with trends in Japanese agriculture related to ecological agriculture, organic farming, rural community development and alternative food movements, and have had the opportunity to do many deep dives into various aspects of the US organic industry.
However, when I learned that the number of CSAs has been exploding in China, amid increasing discussions of environmental issues and food safety concerns, I was interested in understanding how community supported agriculture was developing in China, in a country with strong state-directed agriculture policy and weak tradition of civil society and community engagement in urban areas. My chance came at the 10th China Community Supported Agriculture Conference held in Chengdu, Sichuan Province in December 2018.
The conference attracted over 1,000 attendees including CSA farms, academics, politician and government staff, farm tourism and education business operators, agritech & food tech companies, certification agencies, architects as well as international guests from France, Netherlands, Canada, the US and Japan.
In China, where farmland is still collectively owned and the majority of farmers are smallholders, China’s CSA movement tends toward developing commercial-oriented agricultural business opportunities through the establishment of environmental-friendly agricultural practices as well as trustworthy distribution channels to consumers. To be honest, I felt that the current Chinese CSA approach is quite different from the original CSA concept of ‘maintaining and developing small-scale organic family farming and of achieving local food sovereignty,’ and there is less sense of ‘community.’
However, with CSA developing in this direction and seemingly embraced by the State government as one tool for improving food safety and building confidence among consumers. CSA could have a large social and political impact in China’s future agricultural scene. It makes Chinese CSA an important movement to watch. Here are some main observations.
1.CSA Projects are Rapidly Expanding but In a Different Trajectory than the US or Japan
CSA, as defined by the International Network for Community Supported Agriculture (URGENCI) is the concept of partnerships between producers and consumers to maintain small-scale organic family farming and of achieving local food sovereignty for communities, as a solution to the problems associated with global intensive agricultural production and distribution. These partnerships of course will take different forms around the world, depending on social, political, economic or agricultural realities.
The CSA movement was born in the US on two farms during late 1980’s in response to an increasingly industrialized food system, marked by large private farms, retail supermarkets and top-down food safety laws and standards. CSA in the US has expanded to 5,000-6,000 programs and more than 12,000 farms are involved in CSA now. Today, you can see various styles of CSA, and the farms working with CSA programs are not only organic but also conventional.
CSA was originally an economic risk-sharing system whereby (mostly urban) consumers signed an annual subscription contract with local small-scale organic farmers before the planting season. The system often includes labor sharing and educational meetups to strengthen the ties between member farmers and consumers. A concept similar to CSA was also seen in Japan and other countries, from the early 1970’s. In Japan, this system is known as teikei (literally ‘partnership’), and it emerged from an awareness of increasing health problems caused by agrochemical usage, during the course of rapid economic development in Japan. Teikei aimed to create relationships between small-scale organic farmers and urban consumer communities.
The concept of Community Supported Agriculture (CSA) was introduced in China almost 10 years ago. In China, one challenge was already that the word used for “community” (shequ) is a word adopted by the Chinese government in 1980s to describe administrative units that took on the welfare and community services role that had previously been carried out by the work unit (danwei) under the communist planned economy system. This word did not necessarily include the broader concepts the word “community” as used in other countries. Together with the lack of a tradition of participatory self-governance in urban cities and the rapid expansion of massive population influx to urban areas, it has been difficult for a broader concept of community to take root in Chinese cities.
The pioneer CSA in China was a farm called Little Donkey Farm in Beijing, which was set up in 2008 as a Renmin University project by PhD student Shi Yan, who had learned about the concept from a small CSA farm in Minnesota. In 2009, a year later, Professor Wen Tiejun, one of the most influential agriculture economists in China, organized the Chinese federation of CSAs with 9 CSA farms, and started to lead the CSA initiative in China. Since then, the little seed sown by the Little Donkey Farm in Beijing has now sprouted to over 1,000 CSA projects all over China and over 100 ,000 farmers and consumers are involved in these projects. The CSA farm concept is attracting highly-educated young Chinese people to start their own farming businesses.
2. The Concept had evolved from ‘Community Supported Agriculture’ to ‘Ecological and Social Agriculture’
Throughout my discussions, it became clear that the CSA movement in China is trying to position itself as much broader concept, encompassing all business opportunities that can strengthen ties between farmers and consumers while ensuring eco-friendly agriculture and food safety.
Concern about food safety, as well as concerns about the environmental impact of farming, are drivers of many Chinese agriculture policies and movements. The idea of organic agriculture (youji nongye), in China, is strongly associated with certification systems and is commercially driven by more by consumer’s food safety concerns than by an underlying political or social philosophy. There is already a growing market for organic labelled foods, with well-recognized corporate players and government support. Shentai Nongye (Ecological Agriculture) is the farming concept promoted in government policies China since late 1980s, meaning eco-friendly sustainable farming model integrating crop and livestock operations.
In order to emphasize that CSA also includes the concept of “society”, the Chinese CSA federation decided to change the Chinese translation of CSA several years ago from “Shequ Zhichi Nongye (literally, Community Supported Agriculture)” to “Shehui Shentai Nongye (Socio-Ecological Agriculture)”. By adding the aspect of Society (Shehui), the CSA Federation emphasizes the importance of ties between farmers and consumers and builds on the already familiar concept of “ecological agriculture”.
3. China’s CSA initiative has strong political and academic support
Academics have played an important role in the CSA initiative in China, from the very first CSA farm. Furthermore, academic-led initiatives are seeking more policy and government involvement in order to broaden the concept and their practices.
For example, the opening event of the conference was a joint signing ceremony for various large-scale government agricultural investment projects in the region, and in the first panel session, several Chinese agricultural economic professors discussed the need for political support for CSAs.
This is strikingly different from the US and Japan, where originally the CSA movement started as voluntary networks of farmers and consumers who shared a philosophy of seeking alternative ways of farming as a counter-movement against intensive, commercial large-scale farming.
5. Technology is being introduced especially in food distribution, payment, traceability and certification.
Technology was extensively covered in the conference, especially various technologies related to food distribution, traceability and certification. With the development of agri-tech and food-tech in China, CSA is also trying to utilize technology to find the optimal way to reach consumers and to ensure an efficient route from farm to consumers. For example, sessions in the conference introduced various cutting-edge blockchain test-cases in agriculture and food chains in developing countries, as well as a fish resource conservation program utilizing tech solutions.
4. The Chinese CSA concept is diverse and includes farmers markets, farm stays, local food branding, rural development and local seed conservation.
The wide diversity of topics covered in the conference was impressive. For example, organic farm managers discussed technology in an organic farming panel: a local corn seed conservation program presented on its collaboration with a university and local villages; rural development was discussed from the viewpoint of international architects; the Sichuan government explained its local food branding initiative and its marketing and export strategy.
Professor Kazumi Kondoh from Chuo University in Japan, who presented on the Japanese teikei system at the conference, raised her concern that the Chinese CSA movement is more focused on profitable business models and is not putting enough effort into encouraging the philosophy of organic agriculture and the ultimate objective of achieving local food sovereignty. Her concern is understandable.
But, if CSA is to be influential in China, it must work with the government under the current Chinese political system and be aligned with current government policies. With growing demand for safe food and escalating concerns about environmental issues, people see clear business opportunities in developing reliable food chains as well as in agri-tourism and agri-education. The CSA movement in China will inevitably be shaped by China’s own characteristics and it remains an interesting area to watch in order to understand the bigger picture of China’s agricultural development and food systems.