DPK criticized for exacerbating overproduction by pushing for mandatory gov't purchase of rice

By Lee Kyung-min

The government's plan to spend over 1 trillion won ($701 million) to buy 450,000 tons of surplus rice this year has reignited a decades-old debate about whether and how much taxpayer money should be used to protect farmers, despite plummeting demand for the once-popular staple crop.

The Ministry of Agriculture, Food and Rural Affairs said on Sept. 25 that the decision was inevitable since the price of rice has hit a 45-year low of 40,725 won per 20 kilograms as of last month, a 24.9 percent year-on-year drop. It was the lowest price of the staple crop seen since the government began compiling related data back in 1977. The ministry expects the government's purchase will push up the price by about 18 percent.

The much-contested government purchase program is taking a new politicized turn for the worse, as indicated by the main opposition Democratic Party of Korea (DPK) pledging an all-out effort to pass a related law whereby the government discretion to determine the purchase volume will be removed. It will in turn mandate all excess rice be bought with taxpayers' money.

Market watchers and experts say the desperate move to court the votes of farmers is a stop-gap measure pushed forward with total disregard for sustainability, innovation and the growth of traditional agriculture businesses ― let alone plunging market demand.

Statistics Korea data showed Korea's per-capita annual rice consumption slumped to 56.9 kilograms last year, down by about 50 percent from 1991.

Short-sighted

"It is short-sighted, pure and simple," said Korea Rural Economic Institute (KREI) senior research fellow Kim Jong-in, referring to the main opposition party's plan for the law revision.

Currently, the government can buy rice if the excess volume is more than 3 percent of the annual estimate or if the price falls by over 5 percent from average figures. The revision will replace the word "can" with "must."

The revision will result in annual excess rice production of 640,000 tons by 2030, more than triple the current figure of 200,000 tons, he said. This will subsequently lead to about 1.4 trillion won of taxpayer money being used to buy surplus rice.

"This is a lose-lose game for both the government and farmers, with taxpayers' money squandered in the process. Continued or increased purchases of surplus rice will confuse supply and demand in the market, only undermining the agricultural authorities' price control functions."

The heated criticism carries all the more weight since the KREI is a state-run research organization.

"The annual surplus rice is expected to average 201,000 tons between 2022 and 2030. Absent policy interventions will see the amount double to 468,000 tons in the same period," he added.

In addition to the increase in the sheer volume of purchased rice, the government will have to pay for storage costs, interest and the difference between the sales and purchase prices of the staple crop.

"The government sells stored rice to traditional liquor makers or agricultural fodder makers three years after buying it. The old crops are sold for as low as 10 percent of the price purchased. How can anyone justify spending taxpayer money just to keep the rice until it goes bad but it is still good enough for making alcohol or feeding livestock?"

The government should provide greater incentives to farmers to switch to other labor-intensive crops for profit, he added, since they are not inclined to leave the rice business, which is largely automated and requires far less labor compared to other vegetables or fruit.

"Over 99 percent of rice businesses are automated," he said. "This is why farmers will not seek other agricultural business choices unless the government provides significant tax, investment or other policy incentives," he said.

Money poorly spent

The ministry maintains that the costs needed to buy and store Korea's staple crop is a one-off, irrevocable expenditure and is therefore unrelated to the spending allocated to foster and develop agricultural businesses.

"The budget for the purchase program concerns buying and paying for storage inventories of rice and the ensuing financing costs, separate from the budget earmarked to nurture young farmers and innovate agricultural industries," the ministry said on Sept. 22.

However, less money spent on buying unwanted rice means more money to invest in future growth drivers, according to Lee In-ho, former chairman of the Korea Economic Association.

"Who among the public would agree to such a claim lacking entirely in common sense? No one wants their hard-earned money to go to waste, especially if there is little room for improvement."

Farmers, however, remain adamant that the government buy surplus rice to curb the steep price fall.

An association of farmers in Gwangju and South Jeolla Province held a press conference in front of the province's office, Sept 26, saying it is with a heavy heart that they are entering into an otherwise joyful autumn with a good harvest this year.

"We are sad to call on the government to promptly purchase the staple crop to curb a steep price fall," the group said.

Kim Sun-ho, the head of the association, said the government is essentially turning a blind eye to its demand, all the while rice prices are hitting a new low.

"The finance minister and agriculture minister should both be dismissed for violating the law that governs the government's purchase of rice," he said.