As supply of A5 Wagyu, Japan's top-grade beef, has become excessive, producers are turning to overseas markets.
According to Nikkei Asia on the 25th (local time), A5 accounted for 76.4% of the beef transacted at wholesale markets nationwide in Japan in April, a record high. That is more than four times the 17.5% share 15 years ago.
A5 is the grade given to Wagyu with both Production yield and meat quality at the highest level. It is characterized by tightly distributed marbling and has long been transacted at higher prices than standard grades.
Producers focused on A5 because of profitability. As calf prices and feed costs rose, output of A5, which can be transacted at comparatively higher prices, increased. Selecting animals with superior marbling for breeding and advances in husbandry techniques have steadily boosted A5 production.
A livestock farm official said, "Considering profitability, we have to produce A5 just to break even."
However, as supply outpaces demand, the premium effect is fading. In May this year at the Tokyo market, the average price of A5 Wagyu was 2,700 yen (25,700 won) per kilogram, up 9% from a year earlier, while the lower A4 grade rose 12%, a bigger jump. The price gap between A5 and A4 narrowed to 6.5%, the smallest since the statistics began.
In Japan, the impact of high inflation is also spreading a reluctance among consumers to order high-priced menu items. A wholesaler official told Nikkei, "These days, restaurants prefer A4, which offers better value for money than A5."
In the end, surplus A5 Wagyu is headed overseas. Japan's beef exports totaled 12,628 tons last year, up 17% from the previous year. Wagyu accounts for most of the export volume, which has grown to about three times the level before the coronavirus disease (COVID-19).
The Japanese government is also backing efforts to expand beef exports. The Ministry of Agriculture, Forestry and Fisheries has set a goal of increasing beef export value to 113.2 billion yen (1.08087888 trillion won) by 2030.
Still, even with rising exports, profitability is falling short of expectations. The average export unit price of Wagyu last year was 6,042 yen (57,661 won) per kilogram, down for a third straight year. Nikkei Asia analyzed that as Japanese companies ramp up their push into Asian markets, the share of sales of relatively lower-priced thin-sliced beef has increased.
Industry voices also note that a strategy focused solely on marbling has reached its limits. An official at a Wagyu exporter said, "As price competition intensifies, it has become difficult to maintain competitiveness with just heavily marbled Wagyu."