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U.S. rice auction receives cool response from local consumers
The Korea Herald
The first public auction of rice imported from the United States was held yesterday, the first time foreign rice has been directly available on the market for consumers. But public sentiment toward the foreign grain was noticeably negative, experts said.
"The number of bids we've received on the first day of our public auction is very low. It is quite a serious concern," Kim Kyung-mee, an official from the Agriculture Ministry's Food Grain Policy Division, told The Korea Herald.

The Agriculture Ministry began electronically auctioning the initial shipment of foreign rice - 1,300 tons of first-grade American Calrose rice - through the state-run Korea Agro-Fisheries Trade Corporation. But only 16 distributors submitted bids and just one winner entitled to sell 40 tons of the U.S. grain, the ministry said. It declined to disclose the auctioned off price.

Korea saw the first shipment of foreign rice totaling 1,372 tons from America on March 23. This was the first shipment of the 22,557 tons the country was obliged to import as of last year from China, the United States, Thailand and Australia under agreements made with the World Trade Organization in 2004. The current volume represents 10 percent of 225,575 tons Seoul agreed to import for last year with nine rice-exporting countries. Korea is required to almost double its import quota to 7.96 percent of its total domestic consumption by 2014.

Rice farmers have been vociferously opposing trade deals that call for a further opening of the rice market. They fear being driven out of business.

And retailers generally agree that it would be in their best interest to wait and see what imported rice has to offer consumers in terms of quality, taste and pricing. They also prefer to prevent possible protests at their storefronts which could be ignited by angry farmers or civic groups.

"The volume that Korea is obliged to import at this stage is actually a very small amount of the total rice consumed - about 0.3 percent - so there is no need to feel that foreign rice is going to suddenly hurt our farmers and our industry," said an official from the Korea Agro-Fisheries Trade Corporation, declining to be identified. "It's all psychological," he emphasized.

With almost no takers for imported rice, the government says it can only wait until public opinion improves. Until then, imports will continue to pile up.

"There's not much the government can really do. We can't break our agreement with the WTO nor can we change our method of selling the foreign grain. Beginning with a public auction is the route we agreed to take with our negotiating partners," said Kim.

Concern over possible clashes between angry farmers and bidders was a major factor as to why the government decided to conduct the bidding electronically.

Agricultural groups have been threatening to stage demonstrations in front of the Agro-Fisheries Corp. in southern Seoul.

"We can only wait and see how the auctions progress. This was only the first of many more," said Kim. The Agriculture Ministry said public bids will take place every Wednesday.

Of the 22,557 tons earmarked from abroad, Chinese rice is to account for 12,767 tons, followed by 5,504 tons from the United States, 3,293 tons from Thailand and 993 tons from Australia. Rice shipped in previously could be used only in processed foods.

The country's agricultural sector now suffers from a declining trend in rice consumption. With an already abundant supply of indigenous rice, farmers fear foreign rice will only disturb the industry by further lowering prices and increasing the surplus.

Rice output totaled 4.76 million tons this year, down 4.6 percent from 2004, according to the Agriculture Ministry. Wider availability of Western and other exotic foods has led to more households substituting traditional rice dishes with other kinds of meals.

Latest data revealed by the Agro-Fisheries Trade Corp. show that the wholesale price of a 20 kilogram sack of indigenous rice last month averaged 35,818 won, the steepest drop in eight years and three months. The figure also represents a year-on-year drop of 10.5 percent.

Still, the Agriculture Ministry says the price of imported rice sold on market shelves will be similar to local brands.

"The latest drop in price of the homegrown crop may have been induced by psychological factors among distributors ahead of the sale of foreign rice," said Kim.

She said the price of shipped in grain would be marked up to stand on par with domestic brands at retail outlets.

Foreign rice faces the challenge of winning the hearts of Korean consumers, who generally believe homegrown rice is of better quality and tastes better.

The government estimates that Koreans pay four times more than the average international consumer does for their staple grain.

Some experts stress the market opening will benefit the local farming industry. They urge farmers to take the opportunity to become more competitive.

"Farmers here need to face reality and be willing to make major reforms in the country's rice market that will help them be more competitive before the 10-year grace period expires under the global trade agreement," said Lee Chang-soo, an agricultural policy researcher at the Korea Institute for International Economic Policy.

Korea is the only WTO member to receive a 10-year moratorium on rice imports, which it renewed in late 2004. By 2014, the country is expected to import 122,610 tons of foreign rice to be sold directly to consumers at supermarkets.
MGR Archive 9.4.2006
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