[Hot Policy] Significantly Reduce Unnecessary Movement to Lower Prices↓ and Increase Freshness↑ 'Nongsanmul Online Wholesale Market'

Nam Hyun-jung, Deputy Director of Distribution Policy Division, Ministry of Agriculture, Food and Rural Affairs
Explains to merchants and consumers nationwide

Distribution costs decrease and farm income increases
Targeting 500 billion KRW in transaction volume this year

Cabbages grown in Haenam, Jeollanam-do, are loaded onto trucks after harvest. After a full four-hour drive, the cabbages arrive at the Garak-dong Agricultural and Marine Products Wholesale Market in Seoul, where they wait in a 5-ton truck for their auction turn. During peak seasons, the wait can extend to two or three days. The cabbages that are sold are sent nationwide to markets and supermarkets through market intermediaries. Sometimes, they return after another four-hour trip to be sold again at the Haenam market. Due to the logistics costs that increase with the cabbages traveling back and forth between wholesale markets, prices rise and freshness declines.

"Isn't there a way to reduce unnecessary transportation?" The 'Online Agricultural Products Wholesale Market,' launched in November last year, began with this concern.

The practical work was handled by Nam Hyun-jung, a senior official in the Distribution Policy Division of the Ministry of Agriculture, Food and Rural Affairs (MAFRA), who became a public servant after passing the 56th Administrative Examination in 2013. When we met at the government office in Sejong on the 6th, Nam explained, "'Digitalization of agricultural product distribution processes' and 'wholesale market efficiency' have been longstanding challenges for MAFRA even before I joined the Distribution Policy Division. The online wholesale market digitalizes the transaction process to shorten distribution channels while maintaining the wholesale market’s positive function of enhancing producers’ price negotiation power and forming appropriate prices, enabling both farmers and consumers to 'win-win.'"

The core of the online agricultural products wholesale market is minimizing logistics movement. Using this market reduces the actual transportation distance of agricultural products, lowering logistics costs and improving freshness. In Europe, although agricultural products are auctioned online without face-to-face contact, the products still gather at wholesale markets like in Korea. Korea’s online wholesale market is unique worldwide in that transactions occur online first while the agricultural products remain at the production site, and only then are the products transported to consumption areas.

The online wholesale market was actively promoted after MAFRA announced the 'Digital Transformation of Agricultural Product Transactions' policy in January last year as part of the 'Advanced Agricultural Product Distribution Structure Plan.' Subsequently, through improvement plans for the agricultural product wholesale market distribution structure, the goal was set to launch the online wholesale market in November.

There were only about nine months until the launch. Nam planned and managed the key milestones for the remaining period: ▲February ? establishing the basic plan and forming the opening task force ▲April ? reporting the basic design of the online platform ▲June ? completing the basic functions of the platform ▲September ? holding a platform demonstration ▲November 30 ? official launch.

Briefings were also held for wholesalers and consumers. Nam said, "When we first proposed wholesale transactions online, wholesalers initially reacted negatively, saying, 'That won’t work. How can you trade without seeing the goods directly?'" To alleviate these concerns, starting in May, Nam traveled extensively to regions including Busan and Gyeongnam, Daegu and Gyeongbuk, Daejeon and Chungcheong, Gangwon, Gwangju and Jeolla, and the metropolitan area, meeting directly with over 450 people including wholesale corporations, production shipment entities (sellers), intermediaries, small and medium-sized marts, and food service and processing companies (buyers) to explain the benefits of the online wholesale market.

Initially, MAFRA planned to establish the online wholesale market’s legal basis by enacting the 'Act on Promotion of Online Agricultural Product Wholesale Transactions' instead of the existing 'Act on Distribution and Price Stabilization of Agricultural and Marine Products,' which regulates physical wholesale markets. However, the bill introduced in March last year did not pass the National Assembly, casting doubt on the market’s launch.

Nam recalled the 'regulatory sandbox.' The regulatory sandbox is a system that allows new products and services using new technologies to be launched and tested in the market under certain conditions (time, place, scale restrictions) without applying all or part of existing regulations. Recently, as consultations and applications for new regulatory exemptions decreased, the Ministry of Science and ICT announced a development plan to not only review submitted projects but also jointly plan necessary business models with the private sector. Nam applied for special regulatory exemptions through the Korea Agro-Fisheries & Food Trade Corporation (aT), the operator of the online wholesale market, securing the legal basis for operation.

The potential of the online wholesale market was also confirmed. Actual transaction analysis showed that farmers’ received prices increased by 4.3%, while costs at the shipping and wholesale stages decreased by 9.9%. What remains is activation. Since its launch, transaction amounts (number of transactions) have steadily increased: 4.2 billion KRW (546 transactions) in December last year, 6.5 billion KRW (1,118 transactions) in January, and 8.5 billion KRW (1,387 transactions) in February. However, this year’s transaction target is 500 billion KRW, while the cumulative transaction amount so far is about 18.2 billion KRW. MAFRA plans to significantly increase the number of traded items and participants. By this month, it will encourage participation from all 460 Agricultural Product Distribution Centers (APCs) and expand handled items to include beef and soybeans in the second half of the year, as well as promote transactions of processed foods such as Stevia tomatoes.

Nam said, "The online wholesale market will be a catalyst to improve the efficiency of agricultural product distribution. In the long term, I hope the online wholesale market will handle transactions while the existing offline market will focus on logistics, coexisting to enhance distribution efficiency."