[Viewpoint] Rice aid a bad way to control price

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[Viewpoint] Rice aid a bad way to control price

What should be a blessing has become a curse for local farmers. Helped by unusually plentiful snowfall last winter, farmers expect another record bumper crop this harvest season even after typhoons and floods. A good harvest, however, is bad news for domestic farmers.

They are getting out their protest gear even before they chop off their first crop. Expectations for a good harvest have already sent rice market prices tumbling.

Wholesale rice that sold for 162,000 won ($140) per 80 kilograms (176 pounds) in February last year nose-dived to the 130,000 won range earlier this year. It further sank to the 120,000 won range this month ahead of the harvest season.

The government hastily announced that it will purchase about 400,000 tons to 500,000 tons of this year’s crop to help ease the glut in the market and stabilize market prices. But its stopgap measure failed to stop the downward spiral in rice prices.

The government’s repurchase will help little to resolve the structural supply excess, but instead will only aggravate the reserve stockpile and force prices further down.

The rice surplus already reached 1.49 million tons, double the recommended 700,000 ton quota. The government doesn’t even have any space left in the silos to keep the 500,000 tons added this year. In another makeshift measure, it plans to use 500,000 tons of past crops for processed goods to make room for this year’s stock.

Farmers’ groups are urging the government to resume rice aid to North Korea to help ease the oversupply. They argue that their problems will be solved once South Korea sends 400,000 tons of rice to North Korea as it did before until it stopped annual aid following North Korea’s shooting of a South Korean tourist in 2008.

North Korea coincidentally has a dire shortage of rice supplies because of poor weather and poor yield after South Korea cut fertilizer aid to the North. Despite heightened tension from the sinking of our naval ship Cheonan, North Korea recently requested rice and cement supplies from us.

Rice aid can kill two birds at once - by helping impoverished North Koreans during hard times and domestic farmers battling with oversupply. The opposition party also quickly joined the chorus on resuming the aid program for North Koreans.

However, sending rice to North Korea to ease prices at home does not make economic sense. The measure will only deepen local farmers’ reliance on the state for income.

Using excess rice to feed North Koreans is no different from a government repurchase program. In both cases, the government would have to make the purchase, while taxpayers would have to foot the bill. The difference is that some of the rice would be stocked at state silos and some of the rice would be handed out to North Koreans for free. If easing market prices is their concern, farmers should demand government help to reduce supplies and not be concerned about what the government does with them.

Stabilizing rice prices and giving aid to North Korea are two very different policies that require different instruments and goals. The local rice supply is a domestic economic matter that should not be linked with North Korean crop conditions. North Korean policy, including the aid program, should be carried out regardless of local crop conditions.

What happens if North Korea suddenly says it no longer needs rice aid from South Korea? Or how would it look for South Korea if it sends rice to North Korea for humanitarian purpose if there’s not enough at home?

Farmers and opposition parties can confuse the government and public by linking the local excess problem to humanitarian aid to North Korea.

Using rice aid to the North as a way to control rice prices in the South can lead to excess production, undermining farmers’ competitiveness and self-sufficiency in the longer run.

Oversupply has long been a major problem among rice farmers. Demand of the staple crop has been dropping because of westernized taste among the population. But the modernization of the farming industry has increased supply.

The industry cannot be forever subsidized by the government and taxpayers. Structural surplus will never be resolved if subsidized rice aid supplies are added to the equation. Then our farmers would become dependent on North Koreans as well.

*The columnist is an editorial writer of the JoongAng Ilbo.
Translation by the JoongAng Daily staff.


By Kim Jong-soo

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