Seek farming opportunities abroad
South Korea’s Seoul Feed Co. brought in 5,000 tons of corn for livestock feed it farmed in the Maritime Province of Siberia through Kunsan Port in May. Last year, it imported 3,100 tons. It plans to increase yields in its farms in Russia to bring home over 50,000 tons of corn supplies per year. Hyundai Resources Development has been growing grains in a 7,500 hectare farm in the Maritime Province of Siberia. In Cambodia, Chungnam Global Agriculture Resources Development has been producing corn in an over-1,300-hectare site. It also formed a guild with local farmers and plans to purchase all 850,000 tons of their corn to import to Korea.
The government has been supporting local companies to look outward for cheaper farm resources amid growing grain costs. South Korea’s food self-sufficiency rate is among the lowest in the Organization for Economic Cooperation and Development. Except for rice, South Korea primarily relies on imports for grain supplies. The self-sufficiency rate in corn hovers around 1 percent and more than 90 percent of soybeans come from overseas. Grain imports reach over 14 million tons a year, worth over 5 trillion won ($4.491 billion). The country is the sixth largest grain importer. It is therefore sensitive to global prices. Grain prices have jumped 2.5 times between 2005 and 2008 and four times in 2012.
The government has established regulations, systems and organization to facilitate and support private companies to seek farming opportunities abroad from 2009. So far 125 companies are registered to farm over 70,000 hectares of land and produce 280,000 tons a year in over 25 countries including Siberia, Cambodia, Mongol, Indonesia, Laos, the Philippines and Brazil.
But we lag far behind Japan and China in their overseas inroads. The Japanese farmers’ association has been running a grain elevator, a storage area that is used to house grain before shipment, with an annual capacity of 23 million tons in the United States since the mid 1960s. China has been spending over $300 million a year to buy farm lands in Africa and Latin America.
Expectations for fast results also make Korean companies difficult. It takes at least five years for them to localize, produce, and be ready for packaging and sales. It took more than 20 years for Japanese farmers to establish a farm and distribution network in Brazil.
Lastly, policy support is still lacking. Loans available for companies are not enough. Companies borrow at terms no different from normal market rates when the guarantee cost on top of the annual lending rates of 2 percent is taken account. Lending rates should come down as much as the policy rates of below 1.5 percent provided for other state-promoted businesses.
by Oh Se-ik, Professor at Konkuk University Department of Global Business Administration