agricultural industrialization in korea dr. kyung ryang kim professor, kangwon national university
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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
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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
II. Agricultural Industrialization in International aspect
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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
II. Agricultural Industrialization in International aspect
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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.
II. Agricultural Industrialization in International aspect
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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
II. Agricultural Industrialization in International aspect
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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%
Crop and hor-ticulture
85%
Animal production
15%
Crop and hor-ticulture
73%
Animal production
27%
Crop and hor-ticulture
58%
Animal produc-tion42%
1987 1995 2001 2010
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III. Agricultural Industrialization in Korea
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
III. Agricultural Industrialization in Korea
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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
III. Agricultural Industrialization in Korea
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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
III. Agricultural Industrialization in Korea
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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
III. Agricultural Industrialization in Korea
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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)
III. Agricultural Industrialization in Korea
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
III. Agricultural Industrialization in Korea
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III. Agricultural Industrialization in Korea
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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
III. Agricultural Industrialization in Korea
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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