Ignoring Market Logic, the Giant Opposition Pushes for Mandatory Rice Isolation... Thousands of Billions of Taxpayer Money Lost Annually

In December last year, an official is inspecting the rice purchased at the Suracheong United Agricultural Cooperative Rice Processing Complex (RPC) in Bibong-myeon, Hwaseong-si, Gyeonggi-do.
[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Son Seon-hee] As the bill related to the ‘mandatory rice market isolation’ promoted by the Democratic Party of Korea is likely to pass in the regular National Assembly session, the government is on high alert. This is because every year, hundreds of billions of won of taxpayers' money could be unconditionally spent on purchasing ‘excess rice.’ With changing eating habits leading to decreasing rice consumption, there are concerns that if such a bill ignoring market logic passes, the structural oversupply in the domestic rice market will worsen.

According to the National Assembly on the 22nd, the amendment to the Grain Management Act containing the ‘mandatory rice market isolation’ passed the subcommittee of the standing committee by the Democratic Party’s sole resolution on the 15th and is scheduled to be submitted to the plenary session next week. The Democratic Party plans to forcibly pass the bill at the plenary session scheduled for the 27th.

The core of this Grain Management Act amendment is ‘rice price defense.’ The annual rice consumption per capita in Korea has been decreasing, from 80.7 kg in 2005 to 56.9 kg last year. Nevertheless, rice prices have rather increased. According to the Ministry of Agriculture, Food and Rural Affairs, the price of rice at the production site during harvest season rose from 32,452 won (20 kg) in 2016 to 53,535 won last year. Although prices fluctuated annually depending on supply and demand, the trend has been upward. This is the result of the government purchasing excess rice every year, and the bill aims to make this mandatory.

While this may help rice farmers in the short term, there are considerable side effects from a mid- to long-term agricultural industry perspective. Jeon Han-young, Director of Food Policy at the Ministry of Agriculture, Food and Rural Affairs, expressed concern, saying, "Since the 2000s, structural oversupply has intensified, and if the government enforces mandatory isolation, it could send a signal to ‘plant more rice.’ Ultimately, this creates a vicious cycle where rice prices rise regardless of demand."

Above all, the biggest problem is the funding. The government has already spent between 500 billion and 1 trillion won in years when rice market isolation was implemented. Last year, about 78 billion won of taxpayers' money was spent solely on isolating 370,000 tons of excess rice production. As early as the 25th, the ruling party and government plan to hold a consultation and announce purchase measures for this year’s excess rice production. Buying rice at market prices and storing it, then selling it cheaply for feed, ultimately results in the evaporation of hundreds of billions of won in public funds.

Since rice oversupply has been a problem for quite some time, the government is also implementing measures such as the strategic crop direct payment system. However, if rice isolation becomes mandatory, resources will be concentrated here, narrowing policy flexibility and potentially shrinking investments in future industries like smart farms. The former food policy director said, "If the budget for rice isolation keeps increasing, it will also encroach on the budget for public interest direct payments," adding, "Investment in future projects such as youth farmer development will also be restricted."

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