Changes in Income Structure by Type of Farm and Policy Implications

Abstract

○ Farm household income, which increased by 11.3% in 2013 from the previous year, has been on the rise for the three consecutive years (by 1.0% in 2014 and 6.5% in 2015), raising expectations for the recovery of the economy of farm households.

○ The policy implications that lie in the positive phenomena of the increase in farm household income can be identified by an analysis of each type of farm household, avoiding the concept of average of farms and classifying the effects of various factors, including the expansion of farming size, specialization of farming, aging farming population, and a growing number of small-sized farms.

○ Each type of farm households, which are classified based on the age of the farm manager (the age of 65) and the standard farming size (2 ha), is characterized as follows. - Group 1, medium/large-sized farms run by young and middle-aged farmers: A group of farmers aged 56 on average. Those in their 40s and 50s account for 75% of this group, and these farms have high potential for growth in the agricultural sector. - Group 2, small-sized farms run by young and middle-aged farmers: A group that mostly consists of part-time farms (Type 2 part-time farms account for over 57%) and other various types of small-scale farms, including new starters, Type 1 and Type 2 part-time farms. It is important for this group to increase opportunities for economic activities. - Group 3, small-sized farms run by aged farmers: A group of farmers aged 74 on average. This group takes up over 50% of the total farm households in the country and has poor farming infrastructure. - Group 4, medium/large-sized farms run by aged farmers: A group of farmers aged 71 on average. This group is mostly comprised of rice-growing farms, but still has large-scale agricultural resources, and 60% of this group have no successor.

○ In terms of the group of medium/large-sized farms run by young and middle-aged farmers, a majority of them have benefited from policies for improving income structure and strengthening competitiveness. But in order to help them grow in a stable way, measures for management stabilization are needed for high-risk farm households with heavy debt.

○ For small-sized farms run by aged farmers, a variety of support policies should be strengthened, including the reinforcement of welfare policies such as the basic living security system, the support for securing stable markets to sell a small volume of products, the 6th industry businesses jointly managed by community, and the creation of nonfarm income through regional policies such as local food promotion.

○ For small-sized farms run by young and middle-aged farmers, whose base for farming business is weak, employment policies for rural areas should be strengthened to help them secure stable nonfarm income, while income growth should be encouraged for some farm households by expanding farming size.

○ In terms of medium/large-sized farms run by aged farmers whose base for farming is solid, it is necessary to encourage them to improve productivity and increase agricultural income through systematized farming and secure human resources as successors to maintain their infrastructure for production.