Research Reports
Performance and Emerging Issues of Vertical Integration Policy in the Livestock Industry
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AuthorWoo, Byungjoon
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Publication Date2015.04.28
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Original
The Korean government has introduced the “law of Livestock industry integration” in 2013. The main purpose of this study is to assess a law-abidingness of poultry industry after the legislation. This study also pursues drawing a task for a successful livestock industry integration policy. To achieve the purpose, this study summarizes a concept and history of a livestock industry integration in Korea. The keystone of the “law of Livestock industry integration” and related regulations are reviewed in the study.
This study shows that top 10 poultry packers’ slaughtering volume occupied 70.4 percent of total domestic poultry slaughtering in 2014. This study estimated the Korean poultry market concentration rate, and its annual growth rate is less than 2 percent during last 10 years. The estimated CR3, CR5, and CR8 are 36%, 50.5%, and 64.7% each. In addition, estimated HHI shows that the annual growth rate of the Korean poultry market is less than 3 percent. All those outcomes confirm that the Korean poultry market is not a perfectly oligopoly market. The becoming of oligopoly market is currently underway but the competition between high-ranked packers is getting deepened.
After introducing the livestock industry integration policy, the poultry productivity index increased from 203.5 in 2000 to 294 in 2013. Especially contracted farms show highly increased outcome compared to non-contracted farms. Farmers replied to the survey that the “law of Livestock industry integration” positively affects several rearing contract related issues.
The survey result from 94 poultry farms shows that farms’ annual number of breeding is about 5 times and average commission is about 23,600 thousand won for a time. The main reasons of farmers’ changing contractor are replied as “quality of chick”, “the amounts of commission”, and “commission evaluation system.” These replies mean farmers still feel disadvantage by packers after introducing the “law of Livestock industry integration” in 2013.
This study realizes the main task for improving livestock industry integration policy is forming the mutual trust between farmers and packers in rearing contract. To meet this end, several policy improvements are necessary such as “prompt introducing and adopting use of standard form contract”, “forming and strengthening the farmer-council toward contractors or packers”, and “monitoring illegal activities of packers.” The U.S. “Packers and Stockyards Program” is also a good example to improve relationship between farms and packers towards better partnership. Introducing a better standard, such as productivity measure or efficiency measure, to analyze a performance of the related policy is another key to achieve better industry structure.
Researchers: Woo Byung-joon, Kim Hyung-jin
Research period: 2014. 12. ~ 2015. 2.
E-mail address: bjwoo@krei.re.kr
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