Analysis of Agricultural Produce Supply-Demand Stabilization Programs of Public Corporations
- With a focus on the Korea Agro-Fisheries & Food Trade Corporation -
Agricultural produce must be distributed within a short time-frame since storage is difficult, and its supply volume is variable depending on external conditions such as climate. Since supply and demand is difficult to control due to such characteristics, price volatility is significantly higher than manufactured products.
This report analyzed the status and issues of the agricultural produce price stabilization program conducted by the Korea Agro-Fisheries & Food Trade Corporation (aT), a public corporation pursuing the stable supply and demand of agricultural produce. The analysis was categorized into logistical support, export promotion and import storage.
The budget for the public corporation’s agricultural produce supply-demand stabilization program increased by about 61.1% from 999.5 billion Korean won in 2007 to 1 trillion 603.4 billion won in 2018 (based on the draft budget plan), with budget allocations mainly in the form of subsidies or loans by aT, which itself operates under the auspices of the Ministry for Agriculture, Food and Rural Affairs.
Upon analyzing the public corporation’s supply-demand stabilization program for agricultural produce, in general, it was found that there is a need to reduce the price volatility of agricultural produce since the price volatility of vegetables such as turnips and Chinese cabbage is increasing. Specifically, it is necessary to increase the use of methods such as contracted cultivation and voluntary supply-demand stabilization typically undertaken by producers’ associations.
In addition, the analysis showed that aT’s price stabilization policy effect turned out to be insignificant. The weight of logistical expenses included in the prices of agricultural produce was excessively high, calling for policy measures to increase the proportion of new distribution channels to reduce costs such as direct transactions. Furthermore, since it would be more difficult to subsidize export logistics expenses for agricultural produce under international treaties such as the WTO agreement, indirect produce export support measures should be developed in response to such treaties.
In terms of area-specific analysis, some new projects for the 2018 distribution support program such as the Regional Unit Food Plan were found to be lacking in preparation. Therefore, such areas should be complemented by rapidly undertaking the procedures (legal grounds, consultations with relevant organizations, etc.) required to launch the new program.
Also, regarding export promotion, some of the export support programs were overly similar or overlapped, resulting in low export performance as in the K-Food Fair. Regarding import storage programs, the budgets for some programs were over or under-appropriated, calling for improvements such as higher performance and the pursuit of differentiated programs.