[SME Regulation Site⑧] Even If You Want to Make Tofu, There Are No Beans

[Planning] Visiting the Regulatory Site for SMEs
Reduction in Directly Supplied Soybeans by the Ministry of Agriculture, Food and Rural Affairs... Annual Recurrence of Imported Soybean Shortages Since 2017
"Abolish Direct Supply Auctions and Establish a Stable Supply System"

The interior of a tofu factory operated by a domestic food company.

33,000 tons is the shortage of imported soybeans used to make processed soybean products such as tofu this year. This represents a 39% shortfall of the required volume. The shortage of imported soybeans faced by the tofu industry has been recurring annually since 2017 due to the reduction of direct delivery soybean supply by the Korea Agro-Fisheries & Food Trade Corporation (aT). At the end of each year, the volume for the following year is allocated early and used, but this year, the volume for next year has been drawn down since the first half of the year. Once the direct delivery volume imported and distributed domestically at designated prices by government-designated agencies such as aT is exhausted, a public auction with a highest bid competition system takes place. However, small and medium-sized enterprises with small scale and weak financial power find it difficult to win bids.

According to the related industry on the 20th, the direct delivery volume for processed soybean products, which use the most soybeans, is only 62.6% of that in 2017. The volume shrank sharply from 57,670 tons in 2017 to 36,086 tons this year. As a result, the shortage of imported soybeans for processed soybean products this year has increased to an estimated 33,157 tons by the industry. This means there is demand but no raw materials, so production cannot proceed. The distorted structure of reducing direct delivery volume and pre-allocating next year’s volume is repeating, forcing companies to constantly live with anxiety about supply shortages and production stoppages. Not only processed soybean products but also various industries using soybeans such as sauces and soy milk are commonly complaining about the management burden caused by the government’s policy of reducing direct delivery soybeans.

Soybeans are supplied to actual demand groups through direct import and distribution by aT under the Ministry of Agriculture, Food and Rural Affairs or by granting import rights. The reduction of direct delivery imported soybeans was promoted to protect domestic soybeans. However, the industry explains that domestic soybean prices fluctuate depending on crop yields, so the current direct delivery volume and domestic soybean protection have no relation at all.

The bigger problem is that the shortage volume is being sold through auction bidding. Kim Seok-won, director of the Gwangju-Jeonnam Processed Soybean Products Industrial Cooperative, said, "They could just supply the direct delivery soybeans as they are, but instead, they reduce the volume and auction off the shortfall to the highest bidder," adding, "Only companies with financial power continue to receive volumes, which is disadvantageous to small and medium-sized merchants. Despite continuous requests to abolish this system, the related government departments have not taken action." Moreover, unlike direct delivery where funds can be recovered immediately, auctions take more than 2 to 3 months from payment of the winning bid to fund recovery, causing cash flow problems for companies. Tofu is designated as a livelihood-suitable industry, meaning many companies are small-scale, and about 1,500 tofu processing companies nationwide are suffering serious management difficulties due to this auction system. Director Kim pointed out, "Although volumes are insufficient, it is difficult to raise prices by bidding on raw soybeans, which makes business operations very uncomfortable."

The industry is calling for an expansion of imported soybean direct delivery volumes and the abolition of the direct delivery auction system. The industry’s position is that converting the sale of shortage volumes to auctions without resolving the shortage problem at all is a repeated policy that ignores the voices of the field that have been complaining for years. Director Kim said, "We want the direct delivery volume to be supplied in the way it was done for 50 years before the introduction of auctions," adding, "They could just increase the direct delivery volume and supply it by the existing method, but not doing so and putting it up for auction is a refusal to admit a wrong policy. The management difficulties of companies are serious."