The high price of agricultural products in Korea is largely due to the rising costs of distribution, which now account for nearly half of the final consumer price. A recent report from the Korea Agro-Fisheries & Food Trade Corporation (aT) reveals that distribution costs made up a staggering 49.2% of the consumer price in 2023, a significant increase from 45.0% a decade prior. This means that for every 10,000 KRW a consumer spends on farm produce, 4,920 KRW goes to distributors. This figure has grown by more than 10 percentage points since 1999, when it was 38.7%.
Disparities by Product and Rising Profits
The impact of these costs varies widely depending on the product. While staple crops like rice have a relatively low distribution cost ratio of 35.9%, the numbers for some vegetables are much higher. Onions and green onions see a 60.8% ratio, and cabbage and radishes are at 64.3%. For some specific items, the situation is even more extreme. Winter radishes (78.1%), onions (72.4%), and sweet potatoes (70.4%) all have distribution costs exceeding 70% of their consumer price. This disproportionately high cost leaves a shrinking share for the farmers themselves.
The increase in distribution costs isn't just due to rising labor expenses. A key factor is the widening profit margins of distributors. The aT report indicates that the profit margin for distributors was 14.6% in 2023, up 1.2 percentage points from a decade ago. A recent analysis by the Bank of Korea supports this, noting the greater market dominance of wholesale and retail businesses compared to small-scale farmers, leading to a situation where increases in consumer prices don't translate into higher earnings for producers.
Government Initiatives to Tackle the Issue
Recognizing this issue, President Lee Jae-myung has made reforming the agricultural distribution system a key policy priority. In a recent statement ahead of the Chuseok holiday, the President called for an acceleration of reforms to create a more reasonable distribution structure that benefits both consumers and producers.
In response, the Ministry of Agriculture, Food and Rural Affairs (MAFRA) is pushing for significant changes. Minister Song Mi-ryeong announced plans to shift the distribution structure toward an online wholesale market. This initiative aims to reduce the number of steps in the distribution chain. To encourage broader participation, the ministry will remove the current requirement for sellers to have an annual transaction volume of over 2 billion KRW. Additionally, MAFRA plans to introduce a system for fixed-price and negotiated transactions within wholesale markets and increase the availability of price information to enhance market transparency. These measures are designed to curb the soaring costs and ensure a fairer distribution of profits throughout the agricultural supply chain.
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