Examining South Korea’s Rice Sector: Challenges, Government Interventions, and Opportunities in 2024

South Korea’s Rice Industry Challenges in 2024

South Korean rice farmers have encountered several challenges in 2024, including reduced production due to shrinking paddy areas, consumption decline, and price volatility. These issues have raised concerns about the long-term sustainability of the rice industry, prompting the government to step in with intervention measures, such as holiday discounts to boost consumption.

According to the United States Department of Agriculture (USDA), South Korea's rice production is forecasted to reach 3.595 million metric tons (mmt) in 2024. This marks a 2.89% year-on-year (YoY) decline and a 15.23% decrease compared to 2014. This production reduction is mainly due to decreased planting areas. The USDA estimates that the rice cultivation area will likely drop to 694 thousand hectares (ha) in 2024, a 1.98% YoY decline and a 14.95% reduction compared to 2014. This long-term decline in rice hectarage is largely driven by government policies aimed at balancing rice supply and demand. These initiatives include supporting farmers who grow “strategic crops” such as wheat, pulses, oats, and other alternatives, encouraging a shift away from rice cultivation.

Figure 1: South Korea’s Rice Production, Consumption, and Cultivation Area from 2014 to 2024

Despite rice being a staple food across Asia, South Korea is experiencing a consumption downward trend. According to the USDA, rice consumption in South Korea is expected to reach 3.9 mmt in 2024, a 6.59% YoY decline and a 7.08% decrease compared to 2014. This downward trend is primarily attributed to the growing adoption of Western-style eating habits, especially among millennials and Gen Z, who favor more diverse and convenient meal options over traditional rice-based dishes.

Additionally, demographic changes in South Korea are contributing to the decline in rice consumption. The country has a rapidly aging population, which tends to consume less food overall due to reduced physical activity. Older individuals often prefer softer, easier-to-digest foods and may choose rice alternatives like pasta and noodles. These shifts in dietary preferences and demographic structure are key factors driving the ongoing decrease in rice consumption in South Korea.

These shifting consumption patterns have resulted in downward price movement, leading to significant losses for farmers. According to the Food and Agriculture Organization (FAO), the wholesale price of good-quality rice in South Korea averaged USD 1.81 per kilogram (kg) in Aug-24. Although this represents a 1.34% month-on-month (MoM) increase, the price has generally been declining since Oct-23.

Figure 2. Wholesale Rice Prices from 2022 to 2024 in South Korea

The recent slight price increase is linked to government initiatives promoting rice consumption, particularly with the Chuseok holiday approaching in mid-September. However, despite the expected rise in demand during Sep-24, farmers remain concerned about the bearish period following the holiday.

South Korea is currently facing an oversupply of rice, with surplus stock from the 2022/23 harvest still available and the 2023/24 harvest is set to begin in about two months. This situation has raised concerns among market participants, prompting calls for swift government action. To address the issue, the South Korean government has been promoting the production of alternative crops such as wheat and oats, as well as rice for flour production. Additionally, the government plans to boost rice consumption during the upcoming Chuseok holiday and purchase more stock from the market to the national reserve. These measures are designed to stabilize rice supply and demand, while protecting farmers from potential losses.

Government Efforts to Support the Agricultural Sector

In the South Korean government's 2024 budget plan, the Ministry of Agriculture, Food, and Rural Affairs (MAFRA) proposed increasing subsidies for reducing rice hectarage and bolstering the rice-for-flour industry. Additionally, MAFRA plans to expand the KRW 1,000 (USD 0.75) breakfast project subsidy to reach 3.97 million university students, up from 2.33 million in 2023. This initiative aims to boost rice consumption among young Koreans, especially Gen-Zs, who typically skip breakfast. The government also aims to continue supporting companies developing new rice-based products, particularly for noodles and snacks. These products are currently in high demand.

Furthermore, the South Korean government announced measures to stabilize prices during the Chuseok holiday on August 28, 2024, to alleviate the financial burden on consumers and boost domestic demand. As part of these efforts, a range of daily life gift items, including Korean beef and rice, will be offered at discounts of up to 50%. To further stimulate the economy, the government aims to distribute 500,000 accommodation coupons for use in non-metropolitan areas during Chuseok. Additionally, various transportation and leisure facility fees will be waived during the holiday, and cultural sites like the Blue House will be opened to the public to encourage travel. These strategies will likely boost rice consumption during the holiday.

In response to the falling prices and upcoming harvest season, the South Korean government purchased an additional 50 thousand metric tons (mt) of rice from the 2023 harvest on August 25, 2024. This brings the total rice purchase to 200 thousand mt, including 150 thousand mt previously acquired between the 2023 harvest season and Jun-24. The move is designed to stabilize rice prices, which have been declining due to reduced consumption. Additionally, the National Agricultural Cooperative Federation plans to clear 100 thousand mt of inventory, resulting in a total inventory reduction of 300 thousand mt, helping to stabilize the rice supply as the 2024 harvest season approaches.

Market Opportunities and Outlook

Amid the current challenges, the rice sector still offers opportunities that market players should capitalize on. For instance, manufacturers can focus on developing rice-based products that align with the evolving dietary trends. Emphasizing convenience, health benefits, and modern applications of rice can attract consumers, particularly millennials and Gen Zs. Products such as Otoki's Rice Ramen, CJ CheilJedang's Bibigo Rice Chips, and Pulmuone's Rice Tteokbokki are examples of ready-to-cook and ready-to-eat offerings that cater to these demographics. To enhance their reach, these brands should leverage government promotional campaigns and ramp up marketing efforts, including utilizing social media platforms like TikTok.

Figure 3. Bibigo Rice Chips from Seaweed Original

Rice producers and manufacturers should also consider diversifying their markets by expanding from domestic to international destinations. The USDA projects South Korean rice exports to reach 125 thousand mt in 2024, marking a 19.05% YoY increase and a significant 6,150% rise compared to 2014. This significant growth indicates a lucrative opportunity for South Korean rice producers. To tap into this potential, producers should tailor their products to meet the global demand for healthier and gluten-free options while leveraging the global popularity of K-pop and K-dramas.

Looking ahead, the South Korean rice market is expected to remain stable in the coming months, supported by government interventions. Tridge anticipates that rice prices will stay relatively stable, with a boost in demand likely benefiting farmers and helping them avoid losses. However, with the upcoming rice harvest, market volatility remains a concern, necessitating innovation and the development of new products to keep market players competitive.