Bluefin Tuna Demand Lures Japanese Investors Chasing 7% Return

From Bloomberg.com: Bluefin Tuna Demand Lures Japanese Investors Chasing 7% Return
The world’s appetite for Japanese tuna, Wagyu beef and other delicacies prized in restaurants as far away as New York’s Morimoto is attracting funds chasing 7 percent returns from investments in farms and fish ponds.

Institutional investors and regional banks have poured at least 23 billion yen ($280 million) into about a dozen funds aimed at boosting exports of Japanese foods. Four are managed by Daisuke Mori, a former Citigroup Inc. (C) banker who has pooled 10 billion yen to invest in projects including tuna farming, most of them on the island of Kyushu in Japan’s south, far from the radiation contamination in the northern Fukushima area.

“Food is the one area that has a big investment potential,” said Mori, 44, president of Dogan Investments Inc. in Fukuoka City. “Locally farmed tuna, pork and beef on Kyushu island should get a stronger connection with the big market outside of Japan.”

Enthusiasm for Japanese food products has led at least 25 regional banks to increase lending to farmers who want to export abroad. Even Japan’s largest brokerage, Nomura Holdings Inc. (8604), is getting involved, assigning former stockbroker Shigekazu Wakabayashi to oversee the farming of sweet mini-tomatoes, the first of which ripened in January. Nomura wants to sell the tomato technology it has developed to China, Russia, India and Southeast Asian countries, company officials said.
Fish Farming

Mori, who ran Citigroup’s Fukuoka branch during his six- year tenure with the New York-based bank, has directed 48 million yen into Burimy Corp., which has set up confined areas where hundreds of thousands of bluefin tuna and yellowtail swim in pens about half a mile offshore. Japan has spent more than three decades pioneering a way to farm tuna, which is one of the most difficult fish to breed.

Burimy plans to sell 2,000 farmed tuna this year and to more than double sales next year, said Takahiro Hama, 42, a company director. While Burimy won’t disclose its returns, Ryohei Hayashi, a senior Dogan manager, said the latest of its funds, which are closed to individual investors, is targeting 7 percent this year.

The tuna farm exports about 40 percent of its fish, mostly to stores and restaurants in California and New York, including the 10th Avenue fusion establishment owned by Masaharu Morimoto, star of the television cooking show “Iron Chef.”
Tuna Pizza

Morimoto’s tuna pizza, an appetizer featuring Japanese farmed-tuna sashimi on a crispy tortilla with olives, is one of the most popular dishes on the menu, according to General Manager James Roberts, who said the restaurant buys farmed tuna from Japan because of concern that ocean stocks of the fish are being depleted.

Burimy has started talks with Tokyo-based Nomura about an initial public offering to fund further export growth in the Middle East and Europe, Hama said.

Regional banks, faced with anemic lending rates of 1.04 percent, also are seeking to capitalize on the popularity of Japanese delicacies abroad to boost lending volumes and profits.

Kagoshima Bank (8390) Ltd., based on the southern end of Kyushu, has increased loans to farmers willing to concentrate on specialty foods for export rather than rice or sugarcane for domestic consumption. Agricultural lending by the bank rose 3 percent as of Sept. 30 as average loans outstanding in Japan declined for a second consecutive year.
Wagyu Beef

Among farmers benefiting from the lending increase are those raising Wagyu beef and Kagoshima black swine, said Masanaka Mei, head of trade promotion at the bank, who has accompanied the lender’s president, Motohiro Kamimura, on trips to Asia and Europe along with customers to scout out new markets for their exports.

Wagyu cattle, including those from Kobe in western Japan, are a Japanese breed known for the tenderness and marbled texture of its meat. Black swine, trademarked as Kagoshima Kurobuta, are a rare breed of pig whose meat has high fat content and is prized for its consistency and flavor.

“Going to food shows and researching overseas food markets is part of my job to seek ways to search for places where Kagoshima-brand products can be sold,” Mei said last month.

Bankers moonlighting as traveling salesmen for their borrowers have paid dividends for Kagoshima Bank: Higher lending helped increase net income 0.9 percent in the six months ended Sept. 30 compared with an average 9.7 percent year-on-year decline among 84 publicly listed regional banks, according to data compiled by Nomura.
‘The Wealthy Class’

A 615 million-yen Kagoshima Bank fund investing in agriculture pays an annual return of about 1.6 percent, said Sota Yonemori, a senior manager of the lender’s business- promotion division.

Kagoshima is the biggest producer of beef and pork among Japan’s 47 prefectures. Exports of Kagoshima beef may eclipse a record 220 tons in the year ending March 31 after quadrupling from 53 tons five years ago, said Noboru Sugiyama, a manager at the Kagoshima prefectural government’s livestock division. Hong Kong buys 80 percent of the exports, he said.

“Kagoshima beef is getting its popularity from the wealthy class in Hong Kong and Singapore,” Sugiyama said. “We want to ship more Kagoshima beef out to Asia. At the same time, we can’t draw a rosy picture of domestic beef demand on the back of stagnant economic growth.”
Yellowtail Exports

Minami Kyushu Chikusan Kogyo Co., a Kagoshima beef and pork farmer and wholesaler, borrows about half of its 3.5 billion yen in loans from Kagoshima Bank and may increase debt to expand farming and capitalize on rising demand from customers in Asia outside of Japan, said President Hirofumi Onimaru.

Japan’s exports of tuna and yellowtail climbed 16.9 percent and 18.1 percent in 2011, respectively, to 7.36 billion yen and 7.76 billion yen from a year earlier, according to data compiled by the agriculture ministry. That compares with an 8.3 percent decline in the country’s total food and forestry products exports last year. Beef shipments abroad totaled 3.48 billion yen last year, up 2.4 percent from 2010, the data shows.

At Nomura Wago Farm Co. -- a partnership between the brokerage and vegetable-farming and wholesaling firm Wago Co. -- Wakabayashi, 58, the former stockbroker, rises at 7 a.m. daily and dons a T-shirt, jeans and boots. Instead of driving to visit customers in Osaka, Tokyo and Kanagawa, where he was in charge of Nomura sales offices, he surveys the indoor farm in Chiba prefecture, 75 kilometers (47 miles) east of Tokyo.
‘Big Change’

His responsibilities include overseeing the greenhouse temperature, which is kept at 28 degrees Celsius (82 degrees Fahrenheit), the nurture of 13,000 seedlings and the workers who package tomatoes in plastic cases marked “Premium Frutica.” Each of the four 1-inch tomatoes in a package has about 30 percent more sugar than other tomatoes sold in Japan, the company said.

Nomura has invested 2.8 million yen in the project and plans to build more greenhouses and expand annual production to 60 metric tons from the current 16 tons, Wakabayashi said.

“It’s a big change in my life, turning into a farmer from a securities salesman,” Wakabayashi, president of Nomura’s farming unit, said. “We are confident we can sell Japan’s advanced crop technologies to overseas markets.”

Wago also is moving ahead with its own mini-tomato projects. It plans to build 50 greenhouses and reach annual revenue of 30 billion yen in the next three years, Takehiko Kogo, deputy head of the firm, said in January.
Mini-Tomatoes

“China and Southeast Asia’s wealthy class is one of our targets, given that people in the region are fond of raw vegetables and fruits that have strong tastes like sweet mini- tomatoes and strawberries,” said Kogo.

The largest bank in the prefecture where the tomato farm is located, Chiba Bank Ltd. (8331), hired its first agriculture business researcher in 2009. Partly as a result, the bank expanded agribusiness lending by 23 percent to 8.04 billion yen in 2011, helping boost net income by 0.6 percent in the six months ended Sept. 30. The bank also increased loans outstanding 3.9 percent, outstripping the average growth for regional banks of 2 percent.

Explosions at the Fukushima Dai-Ichi nuclear plant in northern Japan after an earthquake and tsunami last March contaminated soil, water and forests, delivering a blow to the country’s 100 trillion-yen food industry and the perception of the safety of Japanese food products.

Hama of Burimy estimated that the impact on his business from the nuclear crisis, including lost sales and testing, amounted to about 200 million yen.

“The nuclear accident forced us to do tests at our expense for our farmed fish,” said Hama. “Testing to show our products are safe is the only remedy to cope with harmful rumors after the crisis and convince our customers that our fish are safe.”