Agflation and Food Security 'Red Alert'... Yoon Government Strengthens Grain Self-Sufficiency Foundation (Comprehensive)

[Asia Economy Sejong=Reporters Kim Hyewon and Son Seonhee] The new government is setting new targets for the self-sufficiency rates of wheat and soybean, which have high import dependence, and will actively support agricultural policies from the perspective of food security. For some grains such as wheat, which suffer from a severe lack of storage space, dedicated stockpiling facilities will be established domestically.

According to related ministries and industries on the 28th, the 20th Presidential Transition Committee plans to include in its national agenda a food security enhancement plan that aims to raise the wheat self-sufficiency rate, currently only 0.8%, to 7% by 2027 and to newly install dedicated grain stockpiling bases. This is a more concrete food security policy established within the Yoon Seok-yeol administration’s term (2022?2027).

The new government’s food security policy direction focuses mainly on two aspects: increasing domestic self-sufficiency rates of wheat and soybeans and securing overseas grain supply chains through the private sector, which is similar in essence to previous administrations. The government has laid the groundwork for improving self-sufficiency through measures such as enacting the Wheat Industry Promotion Act (February 2020) and establishing the Basic Plan for Wheat Industry Promotion (November 2020), but farmers have been reluctant to cultivate wheat due to the significant price competitiveness gap with imports. The Yoon Seok-yeol administration is known for its strong stance on prioritizing policy execution from the perspective of food security to resolve these issues.

To respond to overseas supply chains, the government plans to utilize private sector models such as POSCO International. POSCO International, which currently operates a grain terminal in Ukraine, is reportedly reviewing plans to secure volumes through equity investments in local companies in North and South America. The government intends to play a follow-up support role, including establishing grounds for compensating business losses caused by domestic grain import orders in emergencies. A Ministry of Agriculture, Food and Rural Affairs official stated, "We plan to establish a mid- to long-term plan to strengthen food security centered on wheat and soybeans, whose self-sufficiency rates are low despite increasing consumption, within this year."

Yoon Government Adopts 'Food Security Enhancement' as Early National Agenda

The food security enhancement policy direction adopted as an early national agenda by the Yoon Seok-yeol government can be summarized into two main points: increasing food self-sufficiency based on wheat and soybeans and a public-private cooperation model utilizing private resources. Domestically, the strategy is to expand the self-sufficiency base by encouraging planting wheat and soybeans in paddies instead of rice, whose consumption is declining. In the mid- to long-term, the government plans to support private companies to enter local grain distribution and export markets overseas to indirectly secure import volumes. The challenge lies in active fiscal investment, and amid the global surge of nationalist protectionism around food security, whether the new government will intensify policy responses is considered a critical factor for success.

Recently, Russia’s invasion of Ukraine has exacerbated the agflation crisis, making stable grain supply a core issue of food security. The Korea Rural Economic Institute predicted that under a strong shock scenario caused by the war, international grain price surges would rapidly raise domestic prices of compound feed (10.6%), processed foods (6.8%), and livestock products (5.9%).

Wheat and Soybeans Instead of Rice... Farmers Face Long Road to 'Economies of Scale'

The Yoon Seok-yeol government’s focus for improving food self-sufficiency is on wheat and soybeans, which have increasing shares in grain consumption but are overwhelmingly dependent on imports with insufficient domestic production bases. Domestically, the westernization of dietary habits, favoring bread over rice, has led to a declining annual per capita rice consumption of 57.7 kg as of 2020. However, the self-sufficiency rate for wheat, the second most consumed staple crop, is less than 1%. The new government has set a goal to raise this figure to 7% within five years and to increase soybean self-sufficiency to 37.9%.

The problem lies in the price and quality competitiveness of domestic wheat compared to foreign wheat. Since this directly affects farmers’ income, it is a prerequisite issue. From the farmers’ perspective, there is no economic incentive to cultivate wheat instead of rice because wheat yields per unit area are lower and price competitiveness is weak. According to the Rural Development Administration, domestic wheat prices under private voluntary purchase are 2.1 to 3.7 times higher than duty-free imported wheat. Securing ‘economies of scale’ is an urgent task to guarantee a certain level of farmers’ income. A Ministry of Agriculture, Food and Rural Affairs official said, "We are reviewing ways to expand support for wheat and soybeans by reforming the paddy field utilization (double cropping) direct payment system," adding, "We will provide comprehensive support to increase wheat and soybean cultivation."

The industry expects that various policy measures such as 100% purchase guarantees, fertilizer cost support, and expansion of contract farming volumes will be mobilized to broaden the production base. The government will also establish a specialized domestic grain stockpiling base to ensure stable supply and quality management. The volume of public stockpiling purchases is planned to increase from last year’s wheat (10,000 tons) and soybeans (25,000 tons) to wheat (50,000 tons) and soybeans (55,000 tons) by 2027.

"We Will Help the Private Sector to Take the Lead"

Experts agree that improving food self-sufficiency is a national task that must be achieved from the perspective of food security, but finding effective methods is not easy. For decades, raising self-sufficiency rates of crops other than rice has been a policy agenda for every administration, but there have been no clear successes. Especially, overcoming the physical limitations of domestic farmland means actively engaging in overseas supply chains, which is a common view shared by the government and experts. POSCO International operates a grain terminal in Ukraine and conducts export business worldwide, bringing volumes into Korea in emergencies, but the scale is minimal and symbolic in terms of food security.

Kim Jong-jin, a research fellow at the Korea Rural Economic Institute, said, "Farmers need economic incentives, but the primary issue is how to secure massive funding," adding, "Domestically, self-sufficiency should be maximized within the cultivable range, but since there are limits, additional import stabilization strategies must be explored." He emphasized that the government should support private companies, which are the main actors in grain imports, to enter international grain distribution networks (value chains) through acquisitions or overseas agricultural development to connect with domestic grain demand.

Going forward, the government plans to review financial and tax support necessary for private sector overseas supply chain acquisition involving large capital and to support securing sales channels to compensate profits when domestic specialized companies expand overseas, especially in the grain sector. Earlier this month, companies responsible for grain import, distribution, and overseas agricultural development such as POSCO International, Pan Ocean, and CJ met with members of the 20th Presidential Transition Committee’s Economic Subcommittee 2 to request low-interest financial support and tax reductions.

Agflation Crisis... The World Closes Food Gates

It is not recent that major global agricultural exporters have shown ‘restrictive’ moves on grain exports to protect their own food security. Since the outbreak of COVID-19 in 2020, some countries in the Middle East such as Oman and in Asia such as Tajikistan and Kyrgyzstan have early imposed ‘indefinite’ export bans on major grains like wheat, corn, and rice. The Russia-Ukraine invasion this year has become a trigger that awakened global awareness of ‘food security.’ After the war broke out, about ten countries locked down key grains without exception.

As of the 25th of this month, it was identified that 16 countries, including Russia and Ukraine, have imposed export bans or permit systems on major agricultural and livestock products. This trend has rapidly expanded especially after Russia’s invasion of Ukraine. Export restrictions have spread from food grains such as wheat, corn, barley, oats, and soybeans to primary processed products like sunflower oil and palm oil. As the international community imposed export-import sanctions on Russia, which has served as an international ‘food warehouse,’ food security has become a hot topic, especially in countries highly dependent on imports.

A representative case is Indonesia’s recent palm oil export ban. Indonesia, the world’s largest palm oil exporter, suddenly announced an export halt, immediately shocking many importing countries including Korea. Palm oil import prices surged sharply, and processed food companies using palm oil, such as snack and ramen manufacturers, rushed to secure inventory, creating an urgent situation.

The government explained that the background for Indonesia’s strong measures lies in the Russia-Ukraine conflict. Ukraine is the world’s largest producer and exporter of sunflower oil, accounting for 43% (5.97 million tons, average over 2018?2020) of global exports. Russia also exports 2.8 million tons annually, representing 20%. Together, these two countries account for 63% of sunflower oil exports. When the largest sunflower oil suppliers stopped exports due to the war, international edible oil prices soared. Consequently, Indonesian palm oil exporters excessively sold volumes at high prices, causing domestic shortages, prompting the government to take the extreme measure of ‘forced export ban.’

Currently, it is difficult to predict how long Indonesia’s export restrictions will last, and there is no immediate ‘Plan B.’ Furthermore, it is hard to foresee where and when similar export bans might be imposed next. A Ministry of Economy and Finance official overseeing supply chains for export-import items said, "It is a very difficult situation, but we currently hold 3 to 6 months’ worth of inventory, so there will be no immediate disappearance of goods from shelves or supply problems," while expressing concern that "issues like this are sporadically occurring not only with palm oil but also recently in other areas."

This content was produced with the assistance of AI translation services.