"Goal Is Rice Price Stabilization"...Is the 'Mandatory Purchase of Surplus Rice' Up for Fundamental Review? [New Administration Policy Issue]

Grain Act Revision Previously Vetoed
Democratic Party Official: "Negotiation with the Government Possible"
Mandatory Purchases Only for Farmers Who Reduce Rice Cultivation Area Also Considered

During the Yoon Suk-yeol administration, two attempts to revise the Grain Management Act were thwarted by the exercise of the presidential veto (request for reconsideration). However, with the inauguration of the Lee Jaemyung administration, efforts to amend the law are expected to resume. The "Grain Act revision" is one of President Lee Jaemyung's key agricultural policy pledges, but the "mandatory purchase" provision is absent. Even within the Democratic Party, now the ruling party, there has been a shift in stance, with members indicating that the withdrawal of the "mandatory purchase" could be considered as long as "rice price stabilization" can be achieved. This opens the possibility of a fundamental re-examination of whether to legislate the government's mandatory purchase of surplus rice, which has been the core issue in the Grain Act revision debate.

On June 10, a Democratic Party official from the National Assembly's Agriculture, Food, Rural Affairs, Oceans, and Fisheries Committee stated, "There is a possibility of negotiating with the government regarding the 'mandatory purchase of surplus rice' provision during the process of revising the Grain Act." This suggests the possibility of reconsidering the government's mandatory purchase provision. The official explained, "The ultimate purpose of revising the Grain Act is to stabilize rice prices and protect the rice industry," and added, "If these goals can be achieved through other means, the mandatory purchase of surplus rice could be excluded."

During the Yoon Suk-yeol administration, the Democratic Party, then the opposition, pushed for a revision of the Grain Act that would require the government to purchase surplus rice. The reason was that rice prices had been continuously falling, resulting in increased income instability for farmers, and thus a supply-demand adjustment policy was needed to prevent overproduction of rice and maintain appropriate prices. In the 21st National Assembly, the Democratic Party passed a Grain Act revision bill centered on this provision in the 2023 plenary session, but former President Yoon Suk-yeol exercised his veto. The concern was that requiring the government to purchase surplus rice would entrench overproduction and further depress rice prices.

The Democratic Party also pursued a second revision of the Grain Act in the 22nd National Assembly. While the criteria for mandatory purchase were changed to be determined through deliberation by the "Grain Supply and Demand Management Committee," the core issue of "mandatory purchase" remained unchanged. This revision also passed the plenary session but was ultimately scrapped due to a veto by former Acting President Han Ducksoo.

The Grain Act revision resurfaced ahead of the 21st presidential election. At the time, President Lee pledged to "expand the cultivation of alternative crops through the revision of the Grain Management Act and maintain appropriate prices for rice and food crops." However, President Lee did not mention whether the government would be required to make mandatory purchases.

For the Lee Jaemyung administration, the enormous fiscal burden required for the mandatory purchase of surplus rice is an inevitable concern. According to the Ministry of Agriculture, Food and Rural Affairs, over the past four years (2021?2024), the government purchased and isolated a total of 1.24 million tons of rice, averaging 310,000 tons per year, due to oversupply. The cost to purchase 10,000 tons of rice is 24.5 billion won, but the revenue from selling it for industrial alcohol is only 4 billion won. In addition, storage and management cost 6.8 billion won and processing costs such as milling add another 1.3 billion won. This results in a loss of 28.6 billion won per 10,000 tons, amounting to a total loss of 3.5464 trillion won for 1.24 million tons over four years.

As an alternative to the Grain Act revision, one proposal is to retain the government's mandatory purchase provision but set conditions for such purchases. For example, if rice prices fall even after farmers or regions have reduced rice cultivation areas by switching to alternative crops or leaving fields fallow, the government would make mandatory purchases only for those who participated in the reduction measures. A rice industry expert, speaking on condition of anonymity, said, "The Lee Jaemyung administration also agrees that the structure of rice overproduction leads to falling rice prices, and that production reduction is necessary for price stabilization." The expert predicted, "Rather than relying on the 'government's mandatory purchase of surplus rice,' it is highly likely that the administration will pursue policies to reduce rice production by expanding the cultivation of alternative crops such as wheat and soybeans to stabilize rice prices."