Research Reports
A Study on Developing Alternative Policy for Stably Securing Grains: Early Warning System and Overseas Agricultural Investment
-
AuthorSung, Myunghwan
-
Publication Date2008.11.01
-
Original
The purpose of this study was to explore the alternative policies for a stably securing grains in Korea against an unbalanced supply and demand or high prices of world grains.
The production and consumption of world grains is on a trend of steady increasing. While the consumption has increased without much fluctuation, the production has been undergoing a radical change every year. The quantities of world grain production and consumption are expected to grow continuously in the long run. However, it is that recently the conditions of supply and demand for world grains have gotten worse. Since the increase of the world grain consumption and instability of the world grain production in the 2000’s, the international grain prices have increased rapidly from 2006.
In this situation, according to a result of stability tests for the production and futures market prices of world grains, the world production as well as the futures market prices was analyzed to be all instable. Although the world grain production has increased, there are still factors for instable production to influence the international grain price. Hence, it means that it is difficult to foresee how rapidly the world supply and demand of grain and the price will change.
Lately the situation of grain self-sufficiency of Korea has been remained at only about 27%, and the rest of the grain supply is relied upon the import. It is necessary to have a plan in a national dimension to guarantee a stable supply of the grain such as extension of domestic grain supplying capacity and a sustainable supply from overseas and so on.
It is also substantial to develop a system to provide grains in an appropriate time by establishing overseas grain marketing facilities and facilitating the overseas grain production for the future. Another possible scheme to raise the self-sufficiency is to extend the domestic grain production by utilizing the domestic agricultural resources such as land. Hence, it should provide consumers with domestic agricultural products of good qualities and proper prices.
As the domestic supply and demand of the grain is affected by situations abroad, it is essential to build a system for monitoring the world grain supply and demand as well as the price to inform risks in advance. So, we developed an early warning system in the grain market. The early warning model produced the complex leading index and the early warning indicator of the world grain price through the signal approach.
According to the precedence of the index of the complex leading index through the lag coefficient of correlation, the complex leading index seemed highly relevant to the risk index with time lag of 1~6 months. Thus, the early warning model of the grain price was approved to be reliable. Following the result of model analysis, the level of the early warning was divided in 5 steps with specifications per each step and the overall standard of counter plan.
To prepare for the instability of the world grain balance and a sudden rise of the price, many companies and agricultural related associations have been promoting development of overseas agriculture for the sustainable supply of the grain from the past, but repeated trials and errors. Therefore, the Korean grain marketing company need to participate into the international grain market by stages prior to developing the overseas agriculture. It is important to know that the international grain marketing industry is particularly a business to make profit in the course of repeated fails and successes.
This research suggested staged developing strategies, which have been expanding the agricultural investment level after accumulating sufficient knowhow and experiences in the international grain market and securing the grain marketing facilities. In a long term, there is a necessity to produce grains in the overseas for domestic utilization and to diversity the import countries to make provision for food crisis.
Researchers: Sung Myung-Hwan, Kim Tae-Hun, Woo Byung-Joon, Chai Sang Hyen, Seung Jun-Ho, and Park Ji-Eun
Research period: June 2008 - November 2008
E-mail address: mhsung@krei.re.kr
- Next
- Strategies on Revising Primary and Secondary School Textbooks for Reflecting the Functions and Values of Agriculture, Fishery and Food Industries
- Prev
- Performance of Project for Large-scale Environment-friendly Agricultural Districts and Their Follow-up Plans