agricultural industrialization in korea dr. kyung ryang kim professor, kangwon national university

Agricultural Industrializationin Korea

Dr. Kyung Ryang KimProfessor, Kangwon National University

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I. Introduction

II. Agricultural Industrialization in International Aspect

III. Agricultural Industrializa-tion in Korea

IV. Future of Agricultural Industrialization in Korea

Agricultural Industrializationin Korea

Pre-Industrialization Phase Recovery from Korean War

Rapid Development Phase

Increased Food Production, Achieving Food Self-sufficiency

Liberalization Era Increased Farmers’ Incomes

Enhanced Agricultural Competitiveness Accelerated Market Develop-ment

~1960s

1970s

1990s~

Evolution of the Korean Agriculture

I. Introduction

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Linkage EffectsLinkage Effects

“Linkage” : The degree to which it is able to generate demand for the products of other industries

Forward Linkage Backward Linkage

Lead more advanced industries As a base on which other industries can be established Ex: Processing, service sector, tourism, etc

Beneficial feedback effects on agriculture itself Stimulus for increased agricultural production through market expansion

I. Introduction

Contribution of Agriculture to Agricultural Industrialization

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Domestic Agriculture(farmers, suppliers of

agricultural commodities)

Inputs(seeds, chemical

fertilizers, machinery

Varieties, etc.)

TechnologyAdvancement

(Bio-technology)

Consumer’ tastes and

preferences (Domestic &

global markets)

Promoting Domestic Agriculture

Processing,marketing,

trade,financing,

management

Agricultural Global Value Chain

I. Introduction

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• Changing tastes and preferences of consumers• Product differentiation

Growing demand for high-value food com-

modities

• Opportunities to enter global markets• Nonfarm job opportunities for rural residents

From commodities to high-value added pro-

duction

• Partnership, contract farming• Increase in market power

Decrease in farmers’ transaction costs

• Harmonious development and political and eco-nomic stability

Role of Agricultural in-dustrialization

Characteristics of Agricultural Industrialization

II. Agricultural Industrialization in International aspect

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Consolidation of farms to vertical coordina-tion

Intensified competition in global markets

More efficient responses to consumer de-mands

Less dependent on government assistance

Keen to adopt new technologies

Changing Environments of Agricultural Industrialization


General Trends of Agricultural Industrialization

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Historically, agricultural industrialization was dominant in industrialized countries

Recently, most of global economic growth is occurring in non-OECD countries

Challenges for the agriculture industry to supply global econ-omy with sufficient agricultural staples are greater than ever be-fore.

A new green revolution is taking place all over the world to meet the changes in demand by the growing world population and its increased standards of living


General trends of Agricultural Industrialization

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Figure 1. The relative shares of agriculture and agribusiness in GDP change as incomes rise. Source: WDR 2008 team.


General trends of Agricultural Industrialization

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Figure 2. Correlation between human development and the agribusiness/agriculture ratioSource: J. Wilkinson and R. Rocha, Agro-industries for development, FAO, UNIDO, 2009


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Dynamics of Livestock Industry in Korea

Agricultural Products

Growth of Agriculture : $32.4 billion in 2001 → $41.7 billion in 2010 (increased 1.3 times)

Growth of livestock sector: $8.3billion in 2001 → $17.5 billion in 2010 (increased 2.1 times)

The ratio of livestock sector to agriculture : 25.6% in 2001 → 41.9% in 2010

III. Agricultural Industrialization in Korea

Crop and hor-ticulture

93%

Animal production7%


85%

Animal production

15%


73%

Animal production

27%


58%

Animal produc-tion42%

1987 1995 2001 2010


Unit : Mil USD

Source : KREI, 2013

Development of Korean Agriculture

2002 2011 2012CAGR

`02~`12

Rice 9,556 8,009 7,966 -1.8

Vegetable 6,769 8,534 9,384 3.3

Fruit 2,583 3,675 3,744 3.8

Beef 2,136 3,053 3,435 4.9

Pork 2,918 4,545 4,901 5.3

Broiler 729 2,186 2,084 11.1

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Agricultural Industrializa-tion with Mar-ket Liberaliza-tion

- Structural Adjustment of Agriculture - Dev. Of Global Value Chain in Agri. Sector - Development of Large Scale Farming

History of Livestock Revolution

in Globalization Era

1990’s

2008

From 1970 to

1980


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Dynamics of Food Consumption per capitaRiceUnit : kg

LivestockUnit : kg

1970 1980 1990 2000 2009 20100

10

20

30

40

50

60

70

0

20

40

60

80

100

120

140

RiceBeefPorkChickensMilkEggs


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Integrates with the Industrial capital

Activities in all stages used the same rules as in those of indus-tries

Agriculture becomes more dependent on industrial inputs (feed, breeding stock, agricultural chemicals, farm machines, etc.)

Subordinates to the industrial mass purchasing & marketing group

The farming process resembles the industrial manufacturing process

Development of Agricultural Industrializationin Livestock sector


Feeds

Equipments

Breeding stocks

Veterinary services

Construction

Animalproduction

Slaughter Processing

Milk collectionprocessing

Storagetransportation

Wholesaleretail

(Restaurant)

$17.5 billion$19 billion $21.5 billion

Global Value Chain in Korean Livestock Sector, 2010


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Functions

`Exporting

Retailing &Wholesaling

`

`Production

`Input

Supply

Consumers

InternationalImporters

Export(5.1%)

SecondaryProcessing

(6.5%)

MassiveConsumption

(11.2%)

Butcher(56.6%)

SSM(7.2%)

Restaurant(8.5%)

DirectSale

(5.1%)

Processing &Slaughtering

`Local

Marketing

Primary Processing

SlaughteringLocalTrader

Cooperatives

Small ScaleProducers

PrivateCompanies

Input Supply Enterprises(Feeds, Drugs, Facilities, etc)


GVC of the Korean Pork Industry

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Korean Cattle (18 month) Milk Product/Dairy Cattle

Enhancement of Productivity

(1992) 477kg → (2001) 512kg → (2010) 533kg

(1992) 6.176kg → (2001) 8.086kg → (2012) 9.771kg


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Korea’s agricultural industries with international competitiveness :commercialized agriculture (livestock, vegetable, fruits), farm in-puts, agricultural processing, and agricultural marketing industries.

Fast agricultural liberalization during three decades has lead Ko-rea’s agriculture to be of high technological and high quality agricul-ture

- Several approaches to control the GVC Cooperative, input company, processing (exporting) company - Sources of competitiveness : quality differentiation, vertical integration, economies of scale - Disease control system - Comprehensive agricultural policy packages


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Summary of Korean Experience

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Collector Slaughter-house

Whole-saler

Farmers Market Con-sumer

Animal Market Handler

Before

Market ConsumerFarmers Packer

After

IV. Prospects of Agricultural Indus-trialization in Korea

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Discussion Topics

IV. Prospects of Agricultural Indus-trialization in Korea

Conflicts between Marketing business and Agri-food business

Contract farming PRO: Stable supply CON: Dependency of farmers on agri-food business

Dependency on the national food security on global markets

Marketing costs between Business companies and Farmers

The role of the producer (farmer) in the GVC Producer initiative approach : farmer group formation

An effective agri. R&D system, agri. extension system, and a farm credit system

The PPP model including the government and private companies

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Thank you

agricultural industrialization in korea dr. kyung ryang kim professor, kangwon national university

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