Current Status of Supply and Demand of Rice and Stabilization Measures

Abstract

○ Since 2000, rice markets have been structurally oversupplied, and as harvests have been abundant for the recent few years, the stock of rice as of the late 2016 crop year is estimated to be 1.7 million tons.

○ The authorities announced that the rice yield was expected to reach 4.202 million tons in 2016, but the final total yield is assumed to be lower than the estimated figure due to the viviparous germination in the southern regions of the country. - Statistics Korea said on October 7 that the rice production of this year would be 540kg/10a, with the total yield of 4.202 million tons, a 2.9% (125,000 tons) decrease from the previous year. - After Chuseok (Korean Thanksgiving Day), however, frequent rainfall and hot weather caused viviparous germination in 14,823 ha of rice paddy (as of Oct. 24).

○ For stabilizing the supply and demand of rice in the harvest season, the government purchased in advance 250,000 tons of rice surplus exceeding the demand for newly harvested rice, and the bumper supplies from the previous year were kept off the market to stabilize the price of rice in the harvest season. - The total rice yield of this year is forecasted to be lower than the estimated figure due to the damage caused by viviparous germination. The supply of rice in the market is also predicted to decrease from the estimated figure, considering the government’s purchase of 250,000 tons of surplus of newly harvested rice and old rice stocks withheld from the market.

○ In Japan, the government decided to abolish in phase the direct payment system for rice farming to address the oversupply of rice, and strengthen the support for rice production for feed and flour for which demand is expected to be on the rise.

○ In order to correct imbalanced supply and demand of rice, it is necessary to implement the production reduction policy, including the temporary production adjustment system, and divide responsibilities for oversupply. - It will be desirable to promote the temporary production adjustment system until rice stocks decrease to the adequate level, and then reduce the cultivation area of rice for food by easing the requirements for the variable direct payment system (decoupled). - Upon the government’s involvement including the withholding of old rice stocks, it is crucial to encourage other stakeholders to cooperate in implementing the policy to reduce rice production by allocating the expenses to local governments and producers.

○ Mutual cooperation with large companies and certification granted by the government are needed to develop processed rice products and improve the reliability of such products, considering the rice consumption trend. - Rice and processed rice food customized for demand should be developed with consideration for the current consumption trend, including the increase in single-person households and the elderly population and growing demand for healthy diet following the well-being trend. - The authorities should help combine the production capacity of rice processing companies and the marketing capacity of large companies, and provide the certification to small- and medium-sized companies producing safe products so that consumers can purchase such products with no worries.

○ Medium- and long-term plans for supply of rice should be designed. For instance, rice with no value as food can be utilized as feed for livestock, increasing the demand for rice. - According to a survey, a large number of feed producers are using or willing to use rice as feed.