Eliminating Auction Stage Cuts Distribution Costs by 8%, Stabilizes Agricultural Prices to Supply Consumers at Fair Prices...All Profits Except Operating Expenses Reserved to Partially Compensate Producers During Price Crashes
[Asia Economy Reporter Park Jong-il] The Seoul Metropolitan Government is partnering with Jeollanam-do Province to pioneer the introduction of the ‘Jeonnam-type Public Market Wholesaler’ at the Seoul Garak Market in 2023, the first of its kind nationwide.
The market wholesaler system is a wholesale market transaction method where producers and distributors (market wholesalers) negotiate directly without an auction process. In this system, local governments (Jeollanam-do) participate by jointly investing in the establishment of a market wholesaler corporation to ensure public interest.
When market wholesalers receive agricultural products directly from production areas and sell them directly to consumers, the auction stage, which is mainly conducted at the existing Garak Market, is eliminated, potentially reducing distribution costs by about 8%.
Additionally, since there is a procedure to adjust shipment volumes between farmers and distributors, agricultural product prices stabilize, enabling citizens to receive high-quality agricultural products at reasonable prices.
A producer protection function, which did not exist in the existing market wholesaler system, has also been newly introduced. All profits, except for basic operating expenses, are fully reserved to compensate producers partially if agricultural product prices fall below a certain level.
The Seoul Metropolitan Government announced that it will prepare a dedicated space for public market wholesalers involving Jeonnam and other production area local governments in Wholesale Zone 1 (Vegetable Building 2) of the Garak Market facility modernization project, scheduled for completion in 2023, and will embark on innovation in agricultural and marine product distribution.
On the 6th at 2 p.m., at the Seoul City Hall video conference room, Acting Mayor of Seoul Seo Jeong-hyeop, Governor of Jeollanam-do Kim Young-rok, and Kim Kyung-ho, President of the Seoul Agricultural & Marine Products Corporation, among others, will attend to sign a business agreement with Jeollanam-do for ‘Distribution Innovation of Agricultural and Marine Product Wholesale Markets.’
Currently, 75% of all transactions at Garak Market are conducted through the auction system. Over the past 35 years since the market’s opening, the auction system has contributed to establishing fair and transparent transactions, but it has drawbacks such as price volatility depending on daily supply and demand and additional distribution costs incurred for conducting auctions.
In particular, farmers, who are the actual parties to the transactions, have been excluded from the price determination process, leading to so-called ‘blind shipments.’ When prices collapse, farmers bear the losses, which ultimately fall on consumers.
The Seoul Metropolitan Government plans to expand the public market wholesaler system involving other local governments, starting with the operation of the market wholesaler system with Jeollanam-do. Additionally, it will pursue amendments to ordinances to introduce the market wholesaler system.
Jeollanam-do Governor Kim Young-rok emphasized, “There are limits to stabilizing agricultural product prices and adjusting supply and demand through production area policies such as building Agricultural Product Centers (APCs) and supporting integrated marketing in production areas. Price stabilization policies in wholesale markets that influence price determination, especially in consumption areas like the Garak-dong Agricultural and Marine Products Wholesale Market, are essential alongside production areas.”
Acting Mayor of Seoul Seo Jeong-hyeop said, “Seoul and Jeollanam-do are starting distribution innovation by introducing the ‘Jeonnam-type Public Market Wholesaler System’ at Seoul Garak Market, the first in the nation. Once the public market wholesaler system is introduced, producing farmers will directly participate in negotiations, protecting farmers’ ‘production rights’ and citizens’ ‘food rights’ simultaneously, and it is expected to strengthen the public interest and public nature of the wholesale market. We will address the problems of the outdated auction system in connection with the Garak Market modernization project and bring innovation and change to Garak Market.”
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