The government and the ruling party have decided to buy 450,000 tons of rice this year, including stock rice produced last year and new rice this year, in order to catch the falling price of rice. As of the harvest season (October-December), this is the largest scale ever, and nearly doubles this year’s excess production. The budget for rice purchase alone is around 1 trillion won, and some criticize whether the government has introduced an excessive policy to prevent the mandatory rice market quarantine (government purchase) being promoted by the major opposition Democratic Party.
The government and the ruling party, People’s Power, held the ‘4th High-Level Party Council Meeting’ on the 25th and announced that they had decided on ‘rice price stabilization measures’. The rice market quarantine is a system in which the Agricultural Cooperatives buys rice that has been produced in excess of domestic demand, and the government compensates for the money the Agricultural Cooperatives spend to buy and store rice through taxes. As of the 15th, the price of rice, which fell 24.9% from a year ago (54,228 won) to 4725 won per 20 kg, fell the most since 1977 when related statistics began to be compiled, and the government is planning to rebound the price of rice through government purchases.
The 450,000 tons the government decided to purchase is 200,000 tons more than the excess production this year (250,000 tons) estimated by the Rural Development Administration. The government has decided to purchase more than 100,000 tons of rice produced last year, which is left on the market in this year’s excess production. This is the first time since 2009 that stock rice has been included in the market quarantine quantity, which is normally limited to the rice produced. At a briefing held on the same day, Vice Minister of Agriculture, Food and Rural Affairs Kim In-jung said, “In order to turn the excessively fallen rice price into an uptrend, we have decided that it is necessary to isolate the excess quantity from the market during the harvest period.”
The government’s explanation is that it is a ‘high-landing policy’ for farmers who are struggling with falling rice prices amid rising fertilizer prices in the followingmath of the Russian-Ukraine war, but critical views are strong. Previously, the government decided to increase the amount of public stockpiled rice from 350,000 tons per year to 450,000 tons this year under the pretext of strengthening food security.
The public stockpile is separate from market quarantine, as the government purchases a certain amount every year and stores it in case of emergencies such as supply and demand instability due to a grain shortage and natural disasters. If public stockpiling is included, the government will purchase 900,000 tons of rice within this year, accounting for 23.3% of this year’s projected production.
According to the Ministry of Agriculture, Food and Rural Affairs, the average cost of rice purchase by the government is 200 billion won per 100,000 tons. Although it has a food security function, considering that the government purchases excess production that exceeds private demand in public stockpiling, a budget of 1.8 trillion won is invested in purchasing the excess rice.
Some point out that the government’s measures are the result of excessive awareness of the Democratic Party, which is trying to revise the Grain Management Act so that the government must purchase all excess rice every year. The Democratic Party has selected the revision of the Grain Management Act as a key task to be dealt with at the regular parliamentary session in October, and has foretold its implementation.
The stabilization of rice prices is an ‘agenda’ that the ruling party, which cannot but be conscious of the rural people’s sentiments, must bring. The government is more concerned that the size of the budget input may be large right now, but if market quarantine, which was originally left to the government’s discretion, becomes mandatory, it will give a false signal to the market and deepen the structure of the rice supply glut. Regarding the amendment to the Grain Management Act, Vice Minister Kim said, “Obviously, the oversupply will intensify and the financial burden will increase,” adding, “It may hinder investment for the future of agriculture.
Reporter Hwang Jung-hwan jung@hankyung.com
