As the number of people consuming rice decreases, production remains unchanged, leading to an oversupply of rice. In this context, the opposition party passed the rice management law (the rice law) amendment in the National Assembly, which the president previously vetoed.
The rice law amendment states that when rice is excessively produced and there are concerns about a drop in rice prices, the government is required to buy up the surplus rice. It was discarded in the plenary session after the president exercised veto power (request for reconsideration) during the 21st National Assembly but passed again last month.
Particularly, this amendment not only includes the provision for the government to mandatorily purchase surplus rice but also adds an unprecedented "rice price stabilization system." This system ensures that if rice prices fall below the average annual price, the government will compensate for the difference.
According to a report by Chosun Biz on the 19th, the government and ruling party predicted that the implementation of the rice law amendment would further promote the already serious oversupply of rice.
There is also a forecast that this will accelerate the decline in rice prices, leading to a domino effect that imposes a significant burden on government finances. According to the amendment, farmers would have no reason to stop growing rice, which guarantees annual income. Consequently, the phenomenon of rice concentration will worsen, weakening the autonomous function of crop supply and demand and harming the balanced development of agriculture.
◇ Rice consumption reaches historic low of 'one and a half bowls of rice per day'
Rice production increased from 3.74 million tons in 2019 to 3.88 million tons in 2021, before dropping again to around 3.7 million tons last year. Over the past five years, rice production has slightly declined. However, consumption has decreased more sharply, indicating an oversupply of rice.
According to Statistics Korea, per capita annual rice consumption, which was 81 kilograms in 2005, has decreased each year and was only 56 kilograms last year. This reflects a drop of over 30% in 18 years. This equates to a daily consumption of only 154.6 grams, which corresponds to one and a half bowls of rice. This is the lowest figure since statistics began to be compiled in 1963.
The rice that remains unsold is still being purchased by the government. The rice bought by the government is stored across 3,436 warehouses nationwide and sold as government rice to low-income or vulnerable groups. Last year, the government spent 991.6 billion won on rice purchases. The storage expenses increased from 90.5 billion won in 2019 to 118.7 billion won last year. A budget exceeding 1.1 trillion won has already been allocated for rice purchase and storage.
Experts have expressed concerns that if the rice law amendment is implemented, the imbalance in supply and demand will lead to rising prices for agricultural products. By guaranteeing rice prices, the concentration of rice production will worsen, and the vicious cycle of oversupply and price decline is likely to intensify. Conversely, items excluded from the price guarantee will see reduced production and heightened risks of price increases.
Seung Jun-ho, head of the Grain Economy Research Division at the Korea Rural Economic Institute, noted, "The amendment lacks clear standards for how to set the price support criteria for rice," and emphasized that the issue of rice oversupply should be approached through more fundamental solutions, such as expanding exports of processed foods and increasing the supply of high-quality rice.
◇ Implementation of the amendment expected to consume more than 16% of the Ministry of Agriculture's annual budget
The Ministry of Agriculture, Food and Rural Affairs predicted that if the new rice management law is introduced, surplus rice production will reach 630,000 tons by 2030. Each year, the government is expected to spend around 1.4 trillion won to purchase this rice.
If this trend continues, it is projected that more than 3 trillion won will be needed for rice purchase and storage by 2030. Given this year's Ministry of Agriculture's budget of 18.3 trillion won, this would account for 16.4% of the total budget.
The Ministry of Health and Welfare allocated 2.8887 trillion won for parental support to compensate for income loss due to childbirth and child-rearing. The total budget for domestic infant and toddler care support was also set at 2.6731 trillion won, which falls short of 3 trillion won.
Kim Han-ho, a professor of agricultural economics and sociology at Seoul National University, stated, "Policies that increase the burden on budgets or government stock, such as price support or government purchases, are unsustainable," adding, "If the government becomes the last buyer of overproduced items such as rice, it could lead to adverse effects."
Rural areas are gradually aging. Among farmers, 59% are over 65 years old. In aging rural communities, there is a preference for rice farming, which requires less labor. Currently, nearly half, 46%, of the total cultivated area in the country is devoted to rice cultivation. The mechanization rate for rice farming, from transplanting to harvesting, reaches 99%. In contrast, the mechanization rate for upland crops drops to around 10% in the planting stage.
As a result, while rice is abundant, the overall self-sufficiency rate for grain, when combined with other grains, is only 21%. The self-sufficiency rate for wheat, a main ingredient in bread and noodles, is merely 1.3%. Although the self-sufficiency rate for rice exceeds 100%, reaching 110%, the country still relies heavily on imports for major grains such as beans and wheat.
Experts argue that rather than providing wholesale subsidies for surplus rice, the direction should shift to supporting subsidies for strategic crops like beans planted in rice cultivation areas.
In contrast, the Democratic Party of Korea's National Council for Farmers and Fishermen, which led the amendment, responded to these concerns by stating, "In an era of food crisis, this is a necessary social expense," and refuted that research results on the introduction of price stability measures for 16 crops, including rice, indicate that maintaining the benchmark price at the actual average price requires an annual average of 1 trillion won.
The government is expected to raise the agenda regarding the reconsideration of the rice law amendment and other key bills at a cabinet meeting. Han Duck-soo, acting prime minister, previously expressed opposition to the amendment, stating that it contradicts market logic. However, exercising the veto will carry significant political burdens. The Democratic Party of Korea announced on the 16th that if the acting prime minister exercises the veto, they will pursue impeachment.