Signals indicate that there is a shortage of rice stocks in the market, leading to a significant increase in prices. With the holiday approaching, the possibility of rice prices rising further has increased, prompting opinions that the government should release reserve rice. However, the government has not made a decision to release it, considering the backlash from farmers. As an alternative, the government is issuing discount coupons. By investing enormous taxes to purchase rice, prices have risen, and it aims to lower prices by spending additional taxes. Criticism has emerged that the government's rice reserve policy is not functioning as intended.
◇ Price of 20kg of rice exceeds 60,000 won... Emergency of holiday food prices
According to the Korean Statistical Information Service (KOSIS) on the 4th, the rice price index last month was 109.7, showing an 11% increase compared to the same month last year. The Ministry of Agriculture, Food and Rural Affairs explained, "It seems that the price has risen due to intensified competition among producers' distribution companies facing a shortage of stocks ahead of the new rice shipment."
The upward trend in rice prices is more clearly evident in consumer prices. Recently, a 20kg bag of rice is being sold for more than 60,000 won in the market. According to the Agricultural Products Retail Price Information (KAMIS), the average retail price of 20kg of rice was recorded at 60,256 won (as of September 1), an increase of more than 17% compared to the same period last year.
In this situation, the upcoming Chuseok holiday early next month is expected to cause rice prices to rise further. This is because rice consumption increases sharply during the preparation of holiday foods such as rice cakes. The rise in rice prices is likely to lead to an increase in holiday meal expense.
To alleviate the burden on households, the government is providing a coupon that gives a 3,000 won discount when purchasing one bag of 20kg rice at large supermarkets. It is said that 2 billion won of national finances will be invested in issuing the discount coupons.
◇ Rice price increase induced by active market isolation policy
As there are no signs of stabilizing rice prices, opinions have emerged among the distribution industry and experts that the government should increase the supply by releasing reserve rice.
The government expanded the rice reserve amount from 350,000 tons in 2021 to 450,000 tons in 2022. This increase in purchase was made due to an abundant harvest leading to a decline in rice prices.
The government adjusted the purchase amount to 400,000 tons in 2023 and then increased it again to 450,000 tons in 2024. Additionally, during last year's harvest season, concerns about excess supply due to good harvests led to the additional isolation of 200,000 tons. At that time, the expected excess production was estimated at 56,000 tons, but it was an additional isolation of 144,000 tons.
Releasing rice back into the market could save finances while stabilizing prices, but the government has not made a decision on releasing reserve rice. The plan to supply 30,000 tons through lending has been the extent of it.
A Ministry of Agriculture, Food and Rural Affairs official noted, "It is true that rice prices have risen sharply compared to last year, but this is a base effect due to last year's low prices," adding, "The rice prices are not at an absolutely high level. However, as signals of a shortage in rice are detected in the market, we are attempting to resolve temporary supply shortages through the method of 'lending.'"
This is the first time the government has supplied public reserve stock to the market in a 'lending' manner. Many market participants believe the government is introducing the 'lending' method as a makeshift measure, considering the farmers' opposition that releasing reserve stocks would lower rice prices.
The government has not reduced the public reserve stock for rice during this year's harvest season. The government plans to purchase 450,000 tons of rice as public reserve stock. Considering the plan to retrieve 30,000 tons lent to grain companies, the actual reserved rice will be 480,000 tons.
A Ministry of Agriculture, Food and Rural Affairs official stated, "This year's rice cultivation area has decreased by 20,000 hectares, which falls short of the initial plan of 80,000 hectares," and added, "The reserve stock was determined considering the expected production volume."
Criticism has emerged among experts that the government's goals and administration are at odds. On one hand, it sets a goal of improving the structure of excessive rice production and encourages the cultivation of other crops, while on the other hand, it actively purchases remaining rice from overproduction to promote rice cultivation.
From the farmers' perspective, the high automation rate means less labor is needed, and with guaranteed revenue from government purchases, it becomes difficult to find motivation to plant other crops instead of rice.
Seok Byung-hoon, a professor at Ewha Womans University, remarked, "In Japan, failing to timely release reserve stocks led to a surge in rice prices," and stated, "If signals of a shortage in rice are detected in the market, appropriate amounts should be supplied to stabilize prices. The public reserve system should be operated according to its original purpose."
On the other hand, agricultural experts also argue that it is not a good time to release reserve stocks. Kim Han-ho, a professor in the Department of Agricultural and Resource Economics at Seoul National University, stated, "It is necessary to be cautious about expanding supply during the short-term period ahead of harvest (July to September)," adding, "Releasing reserve rice now could lead to price crashes due to oversupply during the harvest season."