The purpose of this study is twofold: one, to present the findings of research, and two, to make a few suggestions regarding the basic trajectory of South Korea’s grain price policy.
In spite of diverse efforts on the part of the Korean government over the last decade to increase the production of staple grains, the supply-demand gap shows no sign of abating. The Korean government has been importing grains in demand either by cash payments or as loans from foreign entities, and under US Public Law No. 480.
The growing supply-demand imbalance undoubtedly results from a multiplicity of factors that limit grain production and consumption. One of the main factors, however, is the Korean government’s policy to keep grain prices low so as to support the growth of industries. The current grain price policy serves to discourage farmers from increasing their production, while also raising rice consumption in cities.
Under the current grain price policy, the grain supply-demand imbalance will only worsen, causing the nation to spend at least USD 400 million each year to import much-needed food supplies from overseas. The agreement under US Public Law No. 48 in the past allowed the Korean government to import foreign grains by paying in Korean won (KRW), making the grain shortage a relatively minor issue in the international trade balance. Now that Washington has changed its policy on Korea, preferring to sell its goods either for cash payments in American dollars or as part of loans, the status of the Korean grain market is now directly reflected in Korea’s worsening trade balance.
Chapter 2 of this study analyzes producers’ responses to changes in the prices of staple grains. The chapter provides detailed descriptions of the methods and outcomes of analysis and measurement, and also sums up possible implications. Chapter 3 analyzes the grain sales trends, applying a newly developed model of simultaneous equations. Chapter 4 raises issues with the Korean government’s grain programs, and discusses needed improvements. Chapter 5 presents a new grain price planning model that can take into account various economic variables at once in determining optimal price. Chapter 6 summarizes the findings discussed in the previous chapters, and suggests a few recommendations regarding the Korean grain price policy.
Now that increasing the output of staple grains is considered the prime objective on the production side, the Korean government should maintain its price policy on farm inputs, but with greater emphasis on effective grain pricing. On the consumption and distribution side, an overall impact analysis reveals that increases in the price of rice cause Korean consumers to consume more domestically grown rice and less market-sold (government-distributed) rice. While it was impossible to conduct a detailed analysis of the demand for wheat flour due to the dearth of consumption data, it is obvious that the price of wheat flour also significantly affects the grain consumption structure. The price of wheat flour is therefore as significant a factor as the government’s price policy for rice and barley. However, we must note that increases in imports of wheat flour and decreases in its price do not necessarily or proportionately lead Korean consumers to cut down on their rice consumption, as Korean policymakers hoped it would. Although efforts are being made by the government to reform the grain price policy, a number of serious policy issues still remain to be solved.
곡가정책의 계획화(Planning the grain price policy)
차선의 양곡정책(Opting for the decond-best grain policy
|Series Title; No||연구총서|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Agriculture|
|Holding||KDI; KDI School|