[Opinion] Daemibulsa (大米不死)

Published 19 Dec.2022 13:31(KST)

[Asia Economy] In the game of Baduk, a large group of stones is called a daema (large group). When a daema is captured, the player is likely to lose, so players put all their effort into saving it, making it difficult to capture; this is called daema bulsa (大馬不死, "the large group does not die"). This term is also used outside of Baduk, for example, when the government rescues a large corporation facing bankruptcy due to the ripple effects it may cause. In the English-speaking world, there is a similar expression: "Too big to fail."

In Korean agriculture, rice is truly the daema. When people think of farming in Korea, they commonly think of rice farming, and in fact, more than half of farmers cultivate rice. Because a drop in rice prices significantly impacts farm income and the rural economy, maintaining rice prices has been the top priority of Korean agricultural policy, with the government pouring astronomical amounts of money into market intervention. It could be called daemi bulsa (大米不死, "the large rice does not die") rather than daema bulsa.

Rice consumption is rapidly declining to the point that the saying "rice is the staple food of Korea" is losing its meaning. It is expected that soon meat consumption will surpass rice consumption. Meanwhile, due to government intervention to maintain rice prices, rice production is decreasing more slowly than consumption, resulting in a surplus of rice almost every year. The surplus production exceeded demand by 270,000 tons last year and 150,000 tons this year.

Because supply exceeds demand, rice prices have continued to fall since last year, and the government has implemented market isolation by purchasing surplus rice to save the daema. The cost of rice market isolation by the government last year and this year is expected to reach about 2 trillion won. In this situation, the National Assembly is pushing to amend the Grain Management Act to make rice market isolation mandatory when production exceeds demand. This means further strengthening government intervention in the rice market.

There are growing concerns that if rice market isolation becomes mandatory while rice surpluses still exist, the reduction in rice cultivation area will slow, exacerbating oversupply. On the other hand, there is an argument that if farmers are supported with subsidies equivalent to the income difference between rice and other crops when planting other crops instead of rice in paddy fields, rice oversupply will not worsen.

If rice market isolation is mandatory, farmers have no reason to reduce rice production. Even if rice remains unsold, the government will purchase it, so cultivating rice carries almost no management risk, and there is no incentive to choose other crops amid widespread uncertainty. Especially since rice farming is almost 100% mechanized, it is highly irrational to expend extra effort to cultivate other crops.

According to an analysis by the Korea Rural Economic Institute, even if market isolation is made mandatory and the paddy field crop diversification support project is implemented, the average annual surplus production will reach 430,000 tons by 2030, costing more than 1 trillion won. Under mandatory market isolation, it will be difficult to induce a shift to other crops, and the rice market will fall into a chronic oversupply state.

In Baduk, a daema has very high strategic value. However, focusing only on the daema can lead to losing the game. Because the daema is large, there are many other moves around it. To win, one must save the daema while also making strategic moves to seek new opportunities and expand territory.

For the development of Korean agriculture, new avenues such as food tech and smart farms need to be explored. Additionally, government intervention in the rice market should be gradually reduced to restore market functions. Once market functions are restored, rice oversupply can be naturally resolved. The visible hand of the government cannot replace the invisible hand of the market.