KOREA: ESTIMATES OF SUPPORT TO AGRICULTURE

Contact person: Yoon-Jong Kim

Email: yoon-jong.kim@oecd.org

Tel :

(33-1) 45 24 95 27

Fax :

(33-1) 45 24 18 90

DEFINITIONS AND SOURCES

Country Total Support Estimate (TSE) and derived indicators in Table 1 cover all agricultural production, i.e. all agricultural commodities produced in the country. Definitions of basic data sets refer to the specific name of the programmes. For the Producer Support Estimates (PSE) and Consumer Support Estimates (CSE), the description of policy measures indicates the commodities covered by the measures, as well as the method of allocation of the corresponding transfers among commodities. "MPS commodities", which vary across countries, are those for which market price support is explicitly calculated in Table 2.

Market Price Support (MPS) and Consumer Support Estimates (CSE) by commodity in Table 2 are calculated for the following set of commodities: barley, rice, soybeans, milk, beef and veal, pigmeat, poultrymeat, eggs, red pepper, garlic, and Chinese cabbage. Definitions are provided only for basic data sets from which all the other data sets in this table are derived, following the formula indicated in each commodity table. Specific sources are indicated in square brackets.

Producer Support Estimates (PSE) by commodity in Table 3 are calculated only for commodities produced in the country within a common set of commodities (wheat, maize, barley, oats, rice, sorghum, soybeans, sunflower, rapeseed, sugar, milk, beef and veal, pigmeat, poultrymeat, sheepmeat, wool and eggs), provided that the value of production of that commodity exceeds 1 per cent of the total value of production in the country concerned. All data sets in the calculation of PSE by commodity come from Tables 1 and 2 where definitions are included.

Definitions of the indicators, criteria of classification of programmes included, and methods of calculation can be seen in OECD, Methodology for the measurement of support and use in policy evaluation [http://www.oecd.org/agr/policy].

All data are in calendar years except crop consumption which is in marketing year (rice year) 1 November/30 October, beginning in November of the previous year. For example, crop consumption from November 1999 to October 2000 is associated with data for the 2000 calendar year. In the case of crop production, calendar year 2000 corresponds to the November 2000 harvest.

List of acronyms:

LIDF: Livestock Industry Development Fund.

LPMO: Livestock Products Marketing Organisation (ceased in 2001).

MAF: Ministry of Agriculture and Forestry.

NACF: National Agricultural Co-operatives Federation.

NLCF: National Livestock Co-operatives Federation (merged into NACF in 2000).

RDA: Rural Development Administration.

RPC: Rice Processing Complexes.

Table 1. KOREA: Total Support Estimate

Definitions:

I. Total value of production (at farm gate): Total agricultural production valued at farm gate prices, i.e. value (at farm gate) of all agricultural commodities produced in the country [1].

1. Of which share of MPS commodities (%): Share of commodities for which MPS is explicitly calculated (in Table 2) in the total value of agricultural production.

II. Total value of consumption (at farm gate): Consumption of all commodities domestically produced valued at farm gate prices, and estimated by increasing the value of consumption (at farm gate) of the MPS commodities according to their share in the total value of agricultural production [(II.1) / (I.1) x100].

1. Of which MPS commodities: Sum of the value of consumption (at farm gate prices) of the MPS commodities as indicated in Table 2.

III.1 Producer Support Estimate (PSE): Associated with total agricultural production, i.e. for all commodities domestically produced [Sum of A to H; when negative, the amounts represent an implicit or explicit tax on producers].

A. Market Price Support: On quantities domestically produced (excluding for on-farm feed use -- excess feed cost) of all agricultural commodities, estimated by increasing the MPS for the MPS commodities according to their share in the total value of agricultural production [(A.1) / (I.1) x 100].

1. Of which MPS commodities: Sum of the MPS (net of price levies and excess feed cost) for the MPS commodities as calculated in Table 2.

B. Payments based on output

1. Based on unlimited output

Deficiency payment programme for wine grapes (1989-1992): Payment per tonne calculated as the difference between the government administered price and the international price at which producers sell grapes to wine manufacturers. Applied to all sales to manufacturers.

Price stabilisation programme for fruits and vegetables (1979-1980): Budget expenditures to compensate "Government-designated producers" for the losses they incur when domestic market prices fall below target prices.

2. Based on limited output

C. Payments based on area planted/animal numbers

1. Based on unlimited area or animal numbers

Meat quality enhancement programmes (Beef, pigmeat): Payments per head of animal to encourage beef production (before 1984) and to encourage high quality beef and pigmeat production (from 1993). Payment rates vary according to quality grades.

2. Based on limited area or animal numbers

Milk reduction programme (1990 and 1998): Payments per head of dairy cattle provided to dairy farmers who reduced their milk production.

Payments for environmentally friendly farming practices (from 1999): Payments per hectare to farmers practicing environmentally friendly farming.

D. Payments based on historical entitlements

1. Based on historical plantings/animal numbers or production

2. Based on historical support programmes

E. Payments based on input use

1. Based on use of variable inputs

Credit concessions: Budget expenditures on grants and loans with reduced interest rates from the Livestock Industry Development Fund (LIDF) to help livestock farmers to buy inputs such as animals and feed, or to reclaim and establish pastures and to help them to produce grass efficiently. Allocated to livestock products according to their share in the total value of livestock production.

Payments to fertiliser and pesticide use: Budget expenditures from the General Account to compensate the NACF for its losses in selling fertilisers at a subsidised price and in handling and selling pesticides to farmers. Allocated to crop products according to their share in the total value of crop production.

Payments to irrigation: Half of the budget expenditures from the General Account to support the operational cost of the former Farmland Improvement Association (merged into Korean Agricultural and Rural Infrastructure Corporation in Jan. 2000) which was in charge of operating and maintaining larger irrigation facilities (see also IV.L Infrastructure). Allocated to crop products according to their share in the total value of crop production.

Animal reproduction: Budget expenditures on programmes financed by the LIDF to improve livestock quality. They include artificial insemination, productivity tests and the provision of imported high quality breeds. Support for the provision of silk eggs to farmers. Allocated to milk and beef (except for the latter) according to their share in the value of total milk and beef production.

Payments to seeds: Budget expenditures from the General Account to producersí group to install collective seedling facilities for rice and vegetables. Net losses of the seed projects of the Rural Development Administration (RDA) from the production and distribution of certified seeds. Allocated to crop products according to their share in the total value of crop production.

Soil conservation programme: Budget expenditures to provide lime and silicic acid to farmers to reclaim damaged soils. Allocated to crop products according to their share in the total value of crop production.

Fuel tax exemption: No data available.

2. Based on use of on-farm services

Extension services: Budget expenditures to provide technical assistance to livestock breeders (financed by the LIDF) and for the development of region-specific technologies (financed by the Special Account for Agro-Fisheries and Rural Structure Improvement and the RDA). Non-commodity specific LIDF expenditures are allocated to individual livestock products based on their share in the value of total livestock production. Expenditures from other funds are allocated to all commodities according to their share in the total value of production.

Pest and disease control: Budget expenditures of the NACF to provide manufacturers with agro-chemicals in case of pest outbreak, and budget expenditures to prevent and control outbreaks of "black stem blight" through spraying pesticides. Allocated to crop products according to their share in the total value of crop production.

3. Based on use of fixed inputs

Credit concessions: Budget expenditures on grants and loans to farmers with reduced interest rates:

- from the LIDF to promote farm-level structural adjustment and investment in the livestock industry, allocated to livestock products according to their share in the total value of livestock production;

- from the General Account, the Agriculture and Fisheries Development Fund and the Special Account for Agro-Fisheries and Rural Structure Improvement to develop mechanisation in Korean agriculture, to increase the size of farms, to promote investments in farming equipment and facilities, to improve farm land structures and to restore damaged farmland. It also includes specific preferential loans to help young farmers to start business. Allocated to crops or all commodities depending on the programme, according to their share in the value of crop production or all production respectively.

Tax concessions: No data available.

F. Payments based on input constraints

1. Based on constraints on variable inputs

Milk reduction programme (1981): Budget expenditures on loans with reduced interest rate to dairy farmers who convert dairy cattle for beef production, to buy feedstuffs.

Creation of model towns of environment-friendly farming (from 1999): Budget expenditures on grants to farmers of a village who are practicing environmentally friendly farming by a village unit.

2. Based on constraints on fixed inputs

Fruit acreage reduction programmes: Payments per hectare to farmers who abandoned wine grapes production (1990-1993), peach production (1991-1993) and mandarin production (1997).

Management of livestock wastes programme (from 1990): Budget expenditures on grants and preferential loans to livestock producers to install purification facilities. Allocated to livestock products according to their share in the total value of livestock production.

 

Payment for set-aside (from 2003): Payments per hectare to farmers who set asides or ceases to plant paddy rice or any marketable crops for three years.

 

3. Based on constraints on a set of inputs

G. Payments based on overall farming income

1. Based on farm income level

Disaster payments: Income support to low-income farmers who suffered losses from natural disasters in the form of payments, food aid, support for school tuition, reduced interest rates on household loans and extension of repayment period. Depending on the programme, expenditures are allocated to crop products according to their share in total crop production or to all commodities according to their share in the total value of production.

Social programmes: Income support from the General Account to low-income, small farmersí and fishermenís households to reduce their debt burden; government contribution through the Special Account for Agro-Fisheries and Rural Structure Improvement to an insurance scheme for farmers related to working accidents; tuition support for small farmersí children; government contribution to a savings programme for accession to property. Allocated to all commodities according to their share in the total value of farm and fisheries production.

2. Based on established minimum income

H. Miscellaneous payments

1. National payments

2. Sub-national payments

III.2 Percentage PSE [(III.1) / ((I) + (Sum of B to H)) x 100]

III.3 Producer NPC: For all agricultural commodities the Producer NPC is estimated as a weighted average of the producer NPC calculated for the individual MPS commodities and shown in Table 2. For each commodity Producer NPC = [domestic price received by producers (at the farm gate) + unit payments based on output] / border price (also at the farm gate).

III.4 Producer NAC [1 / (100 - (III.2)) x 100]

IV. General Services Support Estimate (GSSE): Total budgetary expenditure to support general services provided to agriculture [ Sum of I to O] .

I. Research and development

Budget expenditures on research programmes financed by the General Account of the RDA, the Special Account for Agro-Fisheries and Rural Structure Improvement, and the LIDF.

J. Agricultural schools

Budget expenditures to finance facilities, equipment and operational cost of agricultural schools and colleges, to retrain young full-time farmers and farmers enrolled in an early-retirement programme, and to disseminate information and new technologies.

K. Inspection services

Budget expenditures on inspection services of agricultural products (financed by the General Account or the Special Account for Agro-Fisheries and Rural Structure Improvement), of agricultural chemicals and machinery (financed by the General Account) and of mixed feed (by the LIDF); plus budget expenditures on plant and animal quarantine services. Budget expenditures of local governments to support and execute the air spraying of pesticides in order to control pests.

L. Infrastructure

Budget expenditures from the General Account and the Special Account for Agro-Fisheries and Rural Structure Improvement to:

- reclaim, restore and reorganise land,

- develop irrigation and drainage, to improve water supply (See E.1. Payments based on use of variable inputs)

- build farm roads,

- build educational facilities;

- support the construction of equipment and facilities for upstream industries (e.g. feed, machinery) and downstream industries (RPCs, wholesale markets, marketing); and

- support local governments installing equipment and facilities necessary to establish and improve environmentally friendly agriculture zones.

Farmersí retirement programme (from 1997): Payments to farmers aged 65 or over who agree to sell their land to full-time farmers or to rent it for five years.

M. Marketing and promotion

Budget expenditures on domestic and export promotion programmes for various agricultural products such as wheat, fruits and vegetables, flowers and processed traditional products.

N. Public stockholding

Net budget expenditures of the Special Account for Foodgrain Management, the Foodgrain Management Fund and the Foodgrain Stock Management Fund for the handling and the storage of crops by the Government or the NACF.

O. Miscellaneous

1. National expenditure

2. Sub-national expenditure

V.1 Consumer Support Estimate (CSE): Associated with agricultural production, i.e. for the quantities of commodities domestically produced, excluding the quantities used on-farm as feed -- excess feed cost. [Sum of P to S; when negative, the amounts represent an implicit tax on consumers].

P. Transfers to producers from consumers: Associated with market price support on all domestically produced commodities, estimated by increasing the transfers calculated for the MPS commodities according to their share in the total value of production [(P.1) / (I.1) x 100].

1. Of which MPS commodities: Sum of the values of transfers from consumers to producers associated with market price support for the MPS commodities as calculated in Table 2.

Q. Other transfers from consumers: Transfers to the budget associated with market price support on the quantities imported of domestically produced commodities, estimated by increasing the transfers calculated for the MPS commodities according to their share in the total value of production [(Q.1) / (I.1) x 100].

1. Of which MPS commodities: Sum of the transfers to the budget associated with market price support on the quantities imported of the MPS commodities as calculated in Table 2.

R. Transfers to consumers from taxpayers

Milk for schools: Budget expenditures from the LIDF to finance the provision of milk to elementary schools by processing companies

Payments to processors: Budget expenditures to cover part of operational costs of co-operatives and/or downstream companies and to compensate them for purchasing most agricultural products at a higher price than they sell them in order to operate price stabilisation programmes. It is financed by the LIDF for livestock products; by the Agriculture and Fisheries Development Fund, the Special Account for Agro-Fisheries and Rural Structure Improvement for corn, soybeans and rapeseed; and by the Foodgrain Management Fund or the Special Account for Foodgrain Management for cereals. Some expenditures are products specific, others are allocated to the relevant commodities according to their share in the value of production of the relevant group.

S. Excess Feed Cost: associated with market price support on quantities domestically produced and used on-farm as feed as calculated in Table 2.

V.2 Percentage CSE [(V.1) / ((II) - (R)) x 100]

V.3 Consumer NPC: For all agricultural commodities the Consumer NPC is estimated as a weighted average of the consumer NPC calculated for the individual MPS commodities and shown in Table 2. For each commodity Consumer NPC = domestic price paid by consumers (at the farm gate)/ border price (also at the farm gate).

V.4 Consumer NAC [(1 / (100 -(V.2)) x 100]

VI. Total Support Estimate [(III.1) + (IV) + (R)] and [(T) + (U) - (V)]

T. Transfers from consumers [ (P)+(Q)]

U. Transfers from taxpayers [(III.1)-(P)+(IV)+(R)]

V. Budget revenues [(Q)]

Source: Korean Ministry of Agriculture and Forestry.

Table 3. Producer Support Estimate by commodity

Definitions and Sources: see Tables 1 and 2 above.