[Regulations Raising Prices] ① Government Pushes Ahead with 'Imported Soybean Public Auction'... "Tofu and Doenjang Price Increase"

Highest Bid Required to Secure Quantity in Imported Soybean Public Auction
Major Suppliers Do Not Reflect Prices, Causing 'Double Hardship'
SMEs Demand "Abolish Public Auction and Implement Direct Delivery"

(Image source: Pixabay)

The government’s 'imported soybean auction system,' introduced in 2019 to defend domestic soybean prices, is being criticized for driving up the prices of tofu and doenjang on the tables of ordinary citizens. The imported soybean auction system is a method where the government distributes soybeans not by direct allocation at a fixed price but through competitive bidding auctions. Generally, auction winning bids are higher than the fixed price, and large corporations with abundant funds tend to scoop up the goods. Despite soaring grain prices due to global inflation and the Ukraine war, the auctions continue, causing difficulties for soybean processing companies in procuring imported soybeans.

On the 14th of last month, the Korea Federation of Food Cooperatives and seven other major soybean user organizations delivered a petition to President Yoon Suk-yeol at a 'lunch meeting between President Yoon Suk-yeol and small and medium-sized business owners' held at the Korea Federation of SMEs in Yeouido, Seoul. The petition requested the abolition of the imported soybean auction system, arguing that it encourages the highest bid and causes difficulties in procuring imported soybeans. President Yoon’s office responded, "We will look into it carefully."

However, less than a week later, on the 20th of last month, the Korea Agro-Fisheries & Food Trade Corporation (aT), under the Ministry of Agriculture, Food and Rural Affairs, conducted an imported soybean auction. It also announced plans to auction approximately 9,500 tons of imported soybeans in five rounds this year. They stated that the timing and volume of auctions would be flexibly managed, considering the surplus or shortage situations of companies and additional supply volumes. There was no separate dialogue with the small and medium-sized business groups that submitted the petition during this process.

Soybeans are an import-controlled item, and the government strictly controls import and supply volumes. For about 50 years, the government has imported soybeans from the United States, Canada, and other countries and supplied them by directly allocating (direct allocation) to cooperatives and other organizations to which soybean processing companies belong or by distributing and selling import rights to each organization. Then, in 2019, during the previous administration, the government implemented the 'imported soybean auction system,' distributing some of the direct allocation volumes through competitive bidding. Since then, the direct allocation volume of imported soybeans has decreased from 163,000 tons in 2017 to 137,000 tons last year. Meanwhile, auction volumes have steadily increased: 3,433 tons in 2019, 4,000 tons in 2020, 8,200 tons in 2021, and 38,000 tons in 2022.

Imported soybean processing companies unanimously say that the auction method causes excessive competition among actual demand organizations and disadvantages small and micro businesses with insufficient financial power. When conducting auctions, aT set the bid ceiling at 15% above the direct allocation price. As of November 9 last year, the auction ceiling price was 1,610 KRW per kilogram, 15% higher than the direct allocation price at the time (1,400 KRW per kilogram). In 2019, prices traded in the 1,100 KRW range, but due to the rise in direct allocation base prices and auctions, prices have steadily increased. A tofu processing company representative said, "Due to COVID-19 and the Ukraine war, imported soybeans have become scarce, and unless you submit the highest bid, you can hardly secure any volume," adding, "Continuing a system introduced to prevent soybean price crashes even when prices are soaring is excessive administrative convenience."

Moreover, there are complaints that aT’s differential allocation of auction bidding volumes by organization based on last year’s direct allocation and auction performance is unfair. Currently, aT has designated 11 organizations as import soybean demand groups, including the Korea Federation of Food Cooperatives. Organizations that procured between 100 and less than 1,000 tons of imported soybeans through direct allocation and auctions last year could only bid for 10 tons in the recent first auction. Those with 5,000 to less than 6,000 tons could bid for 100 tons, and those with over 9,000 tons could bid up to the maximum of 180 tons. An executive of an import soybean organization said, "Large corporate groups with abundant financial power that can consistently submit the highest bids take most of the volume the following year," expressing frustration, "Because of the uncertainty in imported soybean supply caused by auctions, even when stocks are sufficient, they sweep up the volume."

Even when small and micro organizations struggle to secure volumes and produce tofu or cheonggukjang to supply, major clients, large corporations, do not reflect the cost increases in prices. A tofu processing company representative said, "With direct allocation, the government-set price allows large corporations to reflect price increases, but with auctions, they say the price rose due to competition among bidders and do not accommodate the situation," adding, "It would be better if aT raised the supply price of imported soybeans and returned to direct allocation as before to resolve many side effects."