Hit hard by the nuclear crisis, a large-scale operator of "wagyu" cattle farms has filed for bankruptcy protection, a development that could further hurt Japan's beef industry and deprive investors of billions of yen.
Augra Bokujo, which operates cattle farms in Tochigi Prefecture, said business sharply deteriorated after the accident at the Fukushima No. 1 nuclear power plant in the neighboring prefecture.
With debts totaling 61.987 billion yen ($801 million), the company filed for protection from its creditors on Aug.9 at the Tokyo District Court.
Agura Bokujo is known for a unique business model in which individual investors, called "owners," sign contracts with the company to buy wagyu cows for breeding.
The company raises the cows at affiliated farms and pays the owners for any calves that are born.
When the contract ends, the farm buys back the cows from the owners.
Investors could expect a return of 3-4 percent per annum, according to a senior company official.
The official said Agura Bokujo had contracts with about 71,000 owners in all of Japan's 47 prefectures.
But after the March 11 Great East Japan Earthquake and tsunami triggered the crisis at the Fukushima power plant, the number of canceled contracts shot up three- or fourfold compared with regular years.
Restrictions on grazing and revelations that many beef cattle were fed cesium-contaminated straw added to Agura Bokujo's woes. Fears of radiation contamination in beef caused prices and sales to plunge.
Since these problems surfaced, the Ministry of Agriculture, Forestry and Fisheries had kept a close watch on Agura Bokujo because any change in the company's business could have an impact the overall livestock industry.
The 70,000 cows raised for breeding under contract at Agura Bokujo represented about 10 percent of such animals in the country.
If the company's rehabilitation procedures require the cattle to be shipped to slaughterhouses, Japan's calf production base would drop by 10 percent, according an official in the farm ministry's stockbreeding section.
The Agura Bokujo official told The Asahi Shimbun the company needs to raise more than 400 billion yen to return initial investments to the owners.
However, the company stated in its rehabilitation plan that it will buy back cattle for around 10 percent of the principal, meaning that the investors will likely lose most of the original money.
The plan also said the company will consolidate its directly operated stock farms to around 10 from the current 40, and scale back or abolish commissioned farms now at 333 locations.
These measures will reduce the number of cattle raised to several tens of thousands from 150,000. Nearly 700 workers will lose their jobs.
The farm ministry has instructed prefectural officials to clarify the situation of 300 cattle ranchers under contract with Agura Bokujo.
The ministry is concerned that these ranchers may face a tough time financially due to delays in payments of commissions from Agura Bokujo.
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