As Japan's top-grade A5 wagyu falls into oversupply, producers are turning to overseas markets.
According to Nikkei Asia on the 25th (local time), the share of A5 grade among beef transaction in wholesale markets nationwide in Japan on Apr. was 76.4%, a record high. That is more than four times the 17.5% from 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 it has transacted at higher prices than general grades.
Producers have focused on A5 because of profitability. As calf prices and feed costs rose, the volume of A5, which can be transacted at relatively higher prices, increased. By selecting animals with excellent marbling for breeding and improving rearing techniques, A5 output has steadily grown.
An official at a livestock farm said, "Considering profitability, we have to produce A5 just to break even."
But as supply outpaces demand, the premium effect is weakening. 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 fallout from high inflation is also spreading a tendency among consumers to avoid high-priced menus. An official at a wholesaler told Nikkei, "These days, restaurants prefer A4, which offers better satisfaction for the price than A5."
In the end, surplus A5 wagyu is heading overseas. Last year, Japan's beef exports totaled 12,628 tons, up 17% from the previous year. Wagyu accounted for most of the exports, and the scale grew to about three times the level before COVID-19.
The Japanese government is also throwing its weight behind expanding 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.
However, even with rising exports, profitability is falling short of expectations. Last year, the average export unit price for wagyu was 6,042 yen (57,661 won) per kilogram, down for the third straight year. Nikkei Asia analyzed that as Japanese companies strengthened their push into Asian markets, the share of sales of relatively lower-priced thinly sliced beef increased.
Industry voices also say the strategy focused solely on marbling has reached its limit. An official at a wagyu exporter said, "As price competition intensifies, it has become difficult to maintain competitiveness with simply highly marbled wagyu."