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South Korea Agribusiness Report Q2 2009
Business Monitor International, April 2009, Pages: 46
South Korea Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on South Korea's agribusiness service.
In this South Korea Agribusiness Report for Q2 2009 we introduce the new Business Environment section. This gives an overview of agriculture in South Korea and its significance to the overall economy and labour market. We also cover government support given to agriculture.
In February, the authors revised down their forecast for Korea's 2009 GDP growth to -3.3% after an abysmal final quarter of 2008. Owing to the heavy support provided to farmers by the government and strong loyalty among consumers to domestically produced food, the agricultural sector in Korea will be largely protected against the worst of the turmoil. Demand for home grown rice could even be helped by the tough economic times as consumers cut back on expensive imported food.
However, the economic difficulties could also bring fresh attention to the huge agricultural subsidy bill, which is likely to increase in 2009 as market price support payments increase due to low world prices. The system of subsidy payments to rice farmers was already brought under public scrutiny at the end of last year following the revelation of fraud on a massive scale in applications for payments. As the number of jobless increases and government revenues are pushed, consumers may start to rankle at the high price they have to pay for food because of the protection given to local producers as well as the vast cost of the subsidies and government revenue lost to tax breaks for the agricultural sector.
Countering this, however, will be the raised concerns about food security hanging over from 2008's rice crisis. Though Korea, being self-sufficient in rice, was spared the scramble for supplies of net-importing countries, the fears of rice shortages prompted a re-evaluation of food security across the region. The increase in food-safety scares, particularly regarding Chinese-produced food, will also give highly safety conscious Koreans pause for thought before demanding a change to the current policies.
Over the longer turn and despite the concerns over food security, it seems likely that there will have to be some changes in agricultural policy. With the average age among farmers already very high and small scale farming not such an attractive option for the younger generation, the days of the family farm as the major mode of agricultural production seem limited. In 2002, a law limiting the maximum farm size was lifted, potentially opening the door to more large-scale commercial farms. With improved economies of scale, it could be possible for Korea to cut the subsidy bill paid to agriculture without jeopardising food security or causing a collapse in agricultural output.
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