Research Reports
Farmland Transaction Behavior Surveys and System Improvement Plans
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AuthorChae, Gwangseok
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Publication Date2014.12.30
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Original
Research Background
2014 is the 20th year since the enactment of the Farmland Act. Nevertheless, farm households own only 53% of the total agricultural land, and the percentage of leased farmland is 47.9% as of 2010. One of the important factors preventing efficient use and management of farmland is non-farmers’ illegal ownership and leases of the land. For effective farmland utilization, agricultural products’ price stabilization and infrastructure improvement are important, but it is also needed to establish a system for farmers’ stable ownership and use of the land. Although farmers cannot possess the land, if the base of their stable use is created, problems will decrease.
Method of Research
To prevent illegal farmland leases and enable efficient enterprises’ utilization of the land, while the spirit of the constitution, the land-to-the-tiller principle, is maintained, measures to manage the land should change qualitatively. However, it is necessary to first identify farmland transaction behaviors objectively for effective use management of the land. In the 20th year since the introduction of the current Farmland Act, we need to review the present state and dealing behaviors to improve the agricultural land ownership structure, and based on it, we should examine ways to improve the system.
Conclusion and Implication of Research
Based on the analysis of agricultural land transactions and behaviors, the tasks of system improvement are as follows.
First, Korea’s annual farmland transaction volume is 3.2% of the total agricultural land, higher than other countries’ mobilization level. This results from the current system of farmland acquisition qualification certification that is limited in curbing speculative demand for the land.
Second, according to the regional case study’s results, about 50% of the total agricultural land is under the Farmland Act’s lease controls as of late 2012. Thus, around a majority of the total farmland should obey the Act.
Third, in case of changes in agricultural land ownership, the percentage of inheritance is on the decline and that of transactions is on the rise. The area of farmland acquisition qualification certification accounted for 81.9% of the farmland (paddies and dry fields) transaction volume of the Ministry of Land, Infrastructure and Transport in 2004, but grew to 96.7% in 2013. Accordingly, managing dealings is becoming more important than inheritance in changes in farmland ownership.
Fourth, a small scale and an aspect of assets are emphasized as the features of farmland transactions, and the location is becoming less important in agricultural production. Therefore, efficient land use (grouping) through farmland transaction markets has not been possible.
Fifth, as various regulations on farmland ownership (e.g. limiting the distance between the farmland and the owner’s address) are relaxed, the percentage of dealings with people in other regions is increasing. Particularly, the percentage of sellers’ transactions with people in another city or county was higher than that of buyers’ in two periods, which indicates that there are not many locals who may purchase farmland.
Sixth, the farmland lease market has an insufficient self-regulating market function. According to the agricultural land mobilization mechanism, farmland leases naturally occur in large-scale farms (scaling up or grouping) with high productivity. Nonetheless, the analysis of demand for the leases by farm household shows that the more agricultural land a household has, the less it leases farmland. This results from institutional factors including transaction costs (transfer income tax) and the direct payment system. Also, as the survey results show, one of the reasons is that the market’s supply and demand cannot decide farmland rents.
Seventh, although agricultural land use is inefficient in the farmland transaction and lease market, policy projects are given little weight in the dealing.
Eighth, the Agricultural Production Infrastructure Improvement Project is shown to contribute to some degree to maintaining the farm owner system.
Therefore, we suggested the following countermeasures against these problems: 1) creating regional organizations in charge of farmland management; 2) coordinating agricultural land use actively; 3) introducing a system for managing farmland transactions and leases; 4) pursuing efficient agricultural land utilization by regional unit; 5) supporting farmland purchase for its grouping and efficient use; and 6) abolishing the rule of the transfer income tax exemption for 8-year self-cultivating farmers.
Researchers: Chae Gwang-seok, Kim Hong-sang
Research Period: 2014. 1. ～ 2014. 10.
E-mail Address: gschae@krei.re.kr
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