"Wasn't There a Surplus?" Why Rice Is Scarce in the Market Despite Government Warehouses Being Full [Why&Next]

Recently, the upward trend in rice prices has become concerning. Since the beginning of this month, the retail price of rice has exceeded 60,000 won per 20 kg. When converted to 80 kg, the price easily surpasses 240,000 won. The government attributes the rise in rice prices to a "shortage of inventory among local distributors," meaning there is a limited supply of rice in circulation. This has created a paradoxical situation in which, despite the rice industry being in a state of "chronic oversupply," there is a shortage of rice in the market, causing prices to surge.

According to the Ministry of Agriculture, Food and Rural Affairs, as of the end of July 2025, the government warehouses held 1,115,000 tons of rice. Of this, 732,000 tons were domestically produced, and 383,000 tons were imported rice stored in warehouses.

Despite the massive volume of rice stored in government warehouses, there is still a shortage of rice in the market. According to the private agricultural research institute GS&J Institute, as of the end of July, the market inventory stood at 216,000 tons, a decrease of 46.2% (185,000 tons) compared to the same period last year. Kang Hyungjun, a researcher at GS&J Institute, stated, "This is a decrease of 208,000 tons compared to the previous month, and the market inventory is expected to be depleted in early September. Therefore, rice prices are projected to continue rising until the harvest season in October."

The rise in rice prices due to supply shortages had already been anticipated. Since last month, the government has been running a promotion at four major supermarkets-Homeplus, Lotte Mart, Emart, and Hanaro Mart-offering a 3,000 won discount per 20 kg of rice. Additionally, on August 12, the government began supplying 30,000 tons of government rice (unmilled) to local distributors and others on a rental basis.

Despite these measures, the upward trend in rice prices has not subsided. According to statistics from the Korea Agro-Fisheries & Food Trade Corporation, as of September 1, the retail price of 20 kg of rice (premium product) was 60,256 won, up 2.8% from the previous month and 17.2% higher than the same period last year. Compared to the average year, the price is up by 13.9%. An official from the Ministry of Agriculture, Food and Rural Affairs said, "Of the 30,000 tons of government rice, 80% had been supplied to local distributors by last week, but distribution was delayed due to last week's rain. Starting this week, the remaining volume will be supplied to the market in earnest, which is expected to ease the price burden."

The fundamental reason for the rice shortage in the market is that the government had already isolated more than four times the surplus production last year. To stabilize farm-gate rice prices, the Ministry of Agriculture, Food and Rural Affairs determines the volume of rice to be isolated (purchased) through the Grain Supply and Demand Stabilization Committee every October, during the harvest season. In 2024, surplus production was expected to be 56,000 tons, but 262,000 tons were isolated. The Ministry explained, "In September and October last year, farm-gate rice prices were low at 43,000 to 47,000 won, so we isolated a volume larger than the surplus production to stabilize prices." As a result, excessive market isolation led to a shortage in rice supply, and even with an additional supply of 30,000 tons, the time lag has caused rice prices to continue rising.

Another background to the current rise in rice prices is the increase in demand due to the expansion of rice-processed food consumption. According to the Korea Rice Processing Food Association, sales in the rice-processed food industry grew by 67.3%, from 4.9 trillion won in 2017 to 8.2 trillion won in 2023. Exports also surged by 318.1%, from 72 million dollars to 301 million dollars over the same period. As the related industry has rapidly grown, consumption of rice for processing has also increased. Last year, domestic consumption of rice for processing was 644,000 tons, up 3.9% (24,000 tons) from the previous year (620,000 tons). Compared to 2020 (492,000 tons), this represents a 30.9% (152,000 tons) increase.

With the rice-processed food industry on the rise, rice for processing is also in short supply. Furthermore, the government has reduced the supply of government-managed rice to encourage food companies to use more privately produced new rice, which has exacerbated the shortage. This year, the supply of government-managed rice for processing is 340,000 tons, a 5.0% decrease from last year (358,000 tons).

The rice-processed food industry is currently requesting an additional supply of 50,000 tons of government-managed rice. The supply price for domestically produced government rice is 1,000 won per kilogram, while imported rice is 600 won per kilogram. The price of privately produced new rice is around 2,300 to 2,500 won, making it about four times more expensive than imported rice. Industry representatives are complaining about the lack of price competitiveness.

Cho Sanghyun, Director of Business Operations at the Korea Rice Processing Food Association, said, "The government plans to gradually reduce the supply of government-managed rice for processing to 310,000 tons by 2029, which poses a significant risk of raw material shortages and loss of competitiveness for the rice-processing industry. Moreover, due to the shortage and sharp price increase of privately produced new rice in the market, it is difficult to use it as a processing raw material. Therefore, the government should immediately supply the additional volume needed to maintain production continuity and fulfill export and delivery contracts."

The Ministry of Agriculture, Food and Rural Affairs is also considering additional supply. However, there are concerns that increasing the supply of rice for processing could reduce table rice consumption, since products like instant rice compete with table rice. If table rice consumption declines and leads to oversupply, prices will inevitably fall, which could force the government to make additional purchases to stabilize prices, creating a vicious cycle. An official from the Ministry said, "We are aware that the reduction in government-managed rice supply for processing, combined with the recent shortage of rice in the market and the rise in new rice prices, is causing significant difficulties for rice-processing companies. However, we are currently assessing the scale of companies needing rice for processing, their domestic and export status, and product types. Taking these factors into account, we expect to decide on additional government rice supply as early as this month."