[Column] A populist approach to rice only backfires

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[Column] A populist approach to rice only backfires

Chang Tae-pyong

The author is chairman of the Presidential Committee on Agriculture, Fisheries, and Rural Policy.

A revision to the Grain Management Act is set to pass the legislature. The keystone of the revised bill is to mandate the government to purchase rice if its price falls 5 to 8 percent from the previous year or its output exceeds 3 to 5 percent of the estimated demand. The revision is being pitched by the Democratic Party (DP) to prevent a downward spiral in rice prices and help rice farmers. But in reality, the revision does the opposite.

It is why rice farming associations are opposed to the revision. Many other agricultural organizations, including those representing the livestock industry, also oppose the revision. The government, too, disapproves it. Still, the opposition party is weaponizing its supermajority presence in the legislature to rubber-stamp the changes. It is truly unfortunate that an economic policy that should be based on logic is being guided by political populism.

After rice prices plunged 20 percent during the last harvest, the government purchased 900,000 tons, including half for public stock reserves, and isolated it from the market to help stabilize rice price. The makeshift action was unavoidable, but if government purchases become mandatory, long-term stability in rice prices cannot be assured.

As with any commodities, the price of rice has fallen because of oversupply. While the supply level has not changed, rice consumption fell 2 percent on average over the past 10 years. For instance, average annual rice consumption — 70 kilograms (154 pounds) per person 10 years ago — decreased to 57 kilograms today. A rational choice in this case is either to reduce the supply or increase the demand, because subsidizing the price only helps increase supply.

Rice is Korea’s staple food. The grain took up more than half of the income for farmers in the past. Therefore, the government tried hard to bolster rice output. That effort led to the improvement of the rice fields and irrigation facilities to enable 100-percent unmanned farming. As a result, crop yield improved sharply and rice farming has become easier than growing other grains.

But if the government overly subsidizes the rice price, farmers could shift more to rice over other grains. The rice glut will certainly worsen, while the production of other grains such as wheat and corn (a self-sufficiency rate of only 1 percent) and beans (a self-sufficiency rate of under 10 percent) will shrink further. The imbalance in agricultural industry will surely deepen.

Rice remains indispensable to Koreans. In the past, the crop’s importance was absolute. But addressing the rice issue in the past context can be negative for the country’s farming industry. We must set our eyes on today and the future. Korea consumes 22 million tons of grains, including animal feed — more specifically, 4.2 million tons of rice, 11.5 million tons of corn, 4 million tons of wheat, and 1.4 million tons of beans. That means corn and wheat are as important as rice today.

One person consumes 57 kilograms of rice, 56 kilograms of meat, 86 kilograms of milk, and 70 kilograms of seafood a year. In a couple of years, meat consumption will outweigh rice demand. Livestock and fisheries management have become equally important.

Of the total agriculture output valued at 53 trillion won ($41 billion) in 2021, rice contributed 9 trillion won, vegetables 12 trillion won, fruits 5 trillion won, and livestock 21 trillion won (including 8 trillion won for beef and 7 trillion won for pork). Placing too much weight on rice could impair balanced agricultural growth.

The government purchase of 900,000 tons of rice last year is estimated to have caused budgetary waste of a whopping 700 billion won, including more than 2 trillion won for the cost of financing the purchase and storing the stock, not to mention the cost for quality loss from lengthy market segregation. The waste could exceed 1 trillion won a year in three to four years later. All the money comes entirely from taxpayers.

While joining the World Trade Organization in 1995, Korea excluded rice from items of trade to protect the domestic farming industry. It belatedly opened the market in 2021 with a tariff rate of 513 percent on imports. But the cost of suspension is dear. Due to the Minimum Market Access (MMA) provision, Korea must import 410,000 tons of rice each year.

The exemption of rice in the 1995 agreement was to protect Korean farmers and industry. But it came back as permanent burden. The revisions in the Grain Management Act will repeat the past folly. The DP must pause and think again before it railroads the bill through the National Assembly.

Translation by the Korea JoongAng Daily staff.
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