The Impacts of the COVID-19 on the Korean Agricultural Market

Abstract

This analysis studies the pandemic’s impacts on the Korean agricultural market by using the KREI-KASMO Model. • We used the KREI-KASMO(KREI-Korea Agricultural Simulation Model) to examine overall changes in the agricultural sector after the outbreak of the coronavirus. • We prepared three scenarios to project the impacts: Scenario I (domestic situation stabilized in end-June, the global pandemic continues), Scenario II (overseas and local pandemic continues for the whole year), Scenario III (continuous pandemic at home and abroad and limited increase in Korea’s export value) The value of agricultural production in Korea decreases 0.4~1.0% compared with the baseline due to economic recession around the world caused by the pandemic. • The scenario analysis shows that the farming production will drop by 0.4% (Scenario I)~1.0% (Scenario III) compared with the baselines. • The effect of a decrease in demand for local and overseas produce caused by economic recession is more significant than that of price increase resulted from exchange rate hikes. A decrease in flower production is the largest followed by poultry, vegetables, and grains. Meantime, the production of meat and fruits increases. • (Flowers) As the demand decreased due to cancelled school graduation events and performances amid the pandemic, the total production is likely to reduce 5.7~7.0% compared with the baseline. • (Fruits) A rise in imported fruit prices from the KRW’s depreciation caused a drop in fruit imports. As demand for domestic fruits was higher than demand contraction from economic recession, the fruit production is likely to increase 0.4~0.9% compared with the baseline. • (Meat) While import prices increased due to problems in the international supply chain (closure of meat-processing companies), domestic meat consumption rose. The increase in household consumption is likely to expand production by 0.6~1.5% versus the baseline. Korea’s trade balance is likely to improve by 4.4~7.6% compared with the baseline due to the exchange rate hikes amid the pandemic. • Import value is likely to drop 3.4~5.5% versus the baseline in proportion to exchange rate hikes. • Export value is likely to rise 0.0~1.4% versus the baseline in proportion to exchange rate hikes. • The self-sufficiency rate is likely to expand 0.3~0.4%p due to a decrease of 3.1~4.8% in the import value.