Trend of and Supporting Agri-food Exporters

Abstract

The volume of exported agricultural, forestry and livestock food was $5.6 billion (other than fishery food products) in 2012, the greatest in history, showing the tendency of continued increase. While free trade agreement with other countries continues to be made to shrink the agricultural sector, the significantly growing volume of export is owed mainly to government’s operation of the export support system together with the effort of related institutions as well as farmers. The Korean government supports finding new markets, promoting sales of agricultural and livestock products, and supporting purchase of quality agri-food, in order to increase farmer’s income and to develop the food industry by encouraging export of agri-food. The increased volume of exported agri-food contributes to the export industry of the agricultural sector, creating new demands and stabilizing prices of Korea’s agricultural products.

Nevertheless, there are some issues involved in export and operation of the export system. The first issue is the increasing export logistics cost in the process of export, and too much competition between export companies. This results in dropping the unit export cost over time.

Because many farmers switch the volume of exported agricultural products to the volume for domestic sale when the Korea’s agricultural product prices rise due to weather conditions or peak seasons, it is hard to constantly ensure the volume of exported agricultural products. There are ongoing problems of no substitute policy prepared for abolishing the government support system in the form of direct subsidy, for example, supporting export logistics cost to operate the export system, a limit to effective operation of the government support system, for example, supporting export logistics cost or supporting leading export organizations, no encouragement of farmers for exporting agricultural products, and insufficient support for strategic overseas marketing.

First, there is a need of maximizing the outcome by improving the efficiency of operating major export support programs in order to establish an export industry for agri-food by encouraging export of agri-food. That is, it is necessary to guide poor export companies to be ruled out by differential support for peak export seasons and non-peak export seasons. It is necessary to specify the leading export organization support program centered at unions or export associations, not individual companies. Second, it is necessary to put more support budget for finding new markets, and to establish a compulsory foreign exchange risk insurance and a short-term export insurance on the condition of export logistics cost support to cope with fluctuating foreign exchange rate. Third, it is necessary to promote export of specialized local products in connection of the government with local bodies. It is urgent to develop a system to replace support programs that are more likely to be discarded, and to switch direct aid to indirect support. Fourth, it is necessary to adopt a stabilized price insurance for exported agri-food to absorb a part of sale prices by farmers if the prices of products sold in Korea sharply rise after export contract to ensure the constant volume of exported agri-food.