Korea to buy rice to support the market

The government will buy 230,000 metric tons of more rice this year than
last to stabilize the domestic market price and lift farmers' sentiments
dampened by declining rice demand, the Agriculture Ministry said yesterday.

"The government will make aggressive efforts to draw up appropriate
countermeasures to help stabilize rice prices, which will include
increasing the volume of our rice purchase," Agriculture Minister Chang
Tae-pyong told reporters in Gwacheon.

The 230,000 tons would be an addition to the 2.47 million tons earmarked
early this year, putting the total at 2.7 million tons. The government
is expected to set aside 370,000 tons for the nation's emergency rice
stockpile, while the rice processing centers of Nonghyup, the nation's
farming cooperative, and private rice processing centers will buy the
other 2.33 million tons.

The government emergency reserve is a means of protecting the local rice
market, which is struggling with declining consumption of the staple
grain. Market opening, which has been introducing more diverse food
choices to consumers, has been seen as a big threat to local farmers,
quashing their confidence and making them more dependent on government
support.

The government has also proposed lowering the current loan interest
rates for its unhusked rice support program to zero percent from the
current rates of between 0 and 2 percent to those rice processing
centers that increase their purchase of the harvested staple grain by 15
percent or more.

The agriculture policymaker said the main challenges of the country's
rice market are the areas of production and distribution.

The ministry projected Korea's rice harvest this year to total 4.65
million tons, slightly higher than the average crop harvest volume of
4.57 million tons, but stressed that it is still less than last year's
4.84 million tons.

The government plans to set up local unhusked rice buying centers next
month, while it will stop any financial support to rice processing
centers that make purchases through unlawful means.

"The perception that rice prices will fall due to the belief that this
will be a bumper crop year has dampened the buying sentiment of
distributors, including the rice processing centers run by Nonghyup and
private individuals," Chang said. "A key to removing the negative
sentiment is boosting sentiment and encourage rice purchase."

Of the 370,000 tons bought for the nation's emergency stockpile, 190,000
tons will be used for school meals, the army and social services
centers. The other 180,000 tons will be reserved for public auction.

In response to declining rice demand, Chang said the government will
encourage replacing imported grains with rice and invigorating the
processed rice industry. This would include developing and promoting
consumption of bread products and noodles made with rice.

"I believe we can use 200,000 tons of rice to make processed foods,
including makkeoli (Korean traditional rice wine), rice-based hot-pepper
paste, and other alcohol products, as well as noodles and bread, within
two to three years," the minister said. He noted, however, that Korea
should eventually raise the volume to 400,000 tons like its neighbor Japan.

"We use only 6 percent of our rice supply for processed products,
whereas Japan uses as much as 14 percent, and about 50 percent of its
rice is used to make beer," Chang said. "I believe we will overcome the
rice challenges through these latest proposed measures."