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Future of agricolture in South Corea

The South Korean government has been making strides to improve production in some areas, particularly wheat and milk production, and while still requiring imports to meet demand, the country's livestock sector is also expected to show growth. However, disease outbreaks continue to remain a problem. Regarding the rice sector, although South Korea runs a domestic supply surplus, the government is actively trying to decrease production by providing subsidies to farmers willing to plant other crops on their land.

Key Trends

- Wheat production growth to 2014/15: 98% to 50,000 tonnes. The Korean government launched a programme to boost wheat production to meet 10% of local demand by 2017. Production will also be stimulated by tariffs put on American wheat imports in 2009.
- Beef consumption growth to 2015: 13% to 648,000 tonnes. Beef consumption has proven largely demand inelastic in South Korea, with a majority of consumers not willing to change their beef purchasing habits in the wake of price increases according to various polls.
- Milk consumption growth to 2015: 5% to 1.63mn tonnes. Consumers should continue to switch away from milk to other dairy products. Korea's low birth rate will also contribute to falling demand for milk powder as the use of baby formula drops.
- 2010 Real GDP Growth: 5.5% (up from 0.3 % in 2009; predicted to average 4.4% from 2010 until 2015).
- Central Bank Policy Rate: 2.5% in 2010 (up from 2% in 2009).

Industry Developments

Despite South Korea producing domestically only around 70% of its dairy needs, the government has been working to reduce the amount of milk produced on Korean farms. As demand for fluid milk has failed to keep up with domestic supply, Korea has been left with more milk than is needed for its dairy processing sector. Dairy processing cooperatives are obliged to purchase milk under a marketing quota system and the excess is converted into non-fat dry milk powder. With the price of raw milk paid to farmers set by the government, domestic production of powdered milk is expensive with the cost of production up to twice as much as the price of imported powdered milk.

South Korea faces a difficult situation in its rice sector. While the government has been struggling to stabilise falling domestic rice prices through an annual buyback policy, current stockpiles have reached maximum limits and there is little choice now but to sell them off. Shipping surplus rice to North Korea as aid is a possibility, although prospects for that course of action remain uncertain. Even then, we see sending rice north as only a short-run measure and the agricultural sector would do better to channel resources and funding into other grains sectors to ensure long-term sustainability.

The end of 2009 and H110 saw South Korea's livestock sector hit by damaging disease outbreaks. Perhaps the most serious was the return of foot and mouth disease in January and then again in April 2010. The first outbreak was reported on a dairy farm in Gyeonggi-do on January 2. The government destroyed all the animals on the infected farm and tightened quarantine rules to try and prevent the spread of the disease. Despite this, it was followed by four further outbreaks in the middle of the month. The government has promised compensation for all farmers affected by the outbreak. They have also pledged to review the system to prevent outbreaks of livestock disease.

by S. C.
10 december 2010, World News > Asia