Production:

MY 2015/16 rice production is forecast to remain around 4 million metric tons (MMT) – down 6 percent from 4.24 MMT in 2014/15 – based on five year average yield. According to a recent Korea Rural Economic Institute (KREI) survey of rice farmers from December 26, 2014 - January 2, 2015, planted area is expected to decline to 801,000 HA, down about 1.8 percent from last year. However, high yield varieties will almost offset the lower acreage planted.

Yield

Rice farmers prefer planting high yield varieties to maximize returns. Consequently, increased yields are expected to offset the effects of declining paddy land. The KREI forecasts rice average yields ranging from 493Kg/10a to 509Kg/10a depending on weather conditions.

KREI forecasts for the 2015 crop and Ministry of Agriculture, Food and Rural Affairs (MAFRA) historical data are shown in the following tables.

Korea: 2014 Rice Production Forecast

2014 Rice Production

2015 Rice Production Forecast

Area (1,000 HA)

816

801

Yield (Kg/10a)

520

493-509

Production (1,000MT)

4,241

3,940-4,070


Korea: Rice Area, Yield and Production

Crop

Year

Area

(1,00HA)

Yield

(KG/10A)

Production

(Milled, 1,000 MT)

2002 a/

1,053

471

4,927

2003 b/

1,016

441

4,451

2004

1,001

504

5,000

2005

980

490

4,768

2006

955

489

4,680

2007

950

464

4,408

2008

936

518

4,843

2009

925

532

4,916

2010

892

482

4,295

2011

854

495

4,224

2012

849

472

4,006

2013

833

508

4,230

2014

816

520

4,241

2015d/

801

500c/

4,000

Source: Ministry of Agriculture, Food and Rural Affairs (MAFRA)

a/ Heavy rains during the summer and the effects of typhoon Rusa (Aug 31 – Sep 1)

b/ Cool and rainy days during the growing season and the effects of typhoon Maemi (Sep 9 - 12).

c/ past five year average

d/ FAS/Seoul forecast

Production Policy:

Rice farmers receive two types of income support payments under the Rice Income Compensation Act (RICA), an area payment and a deficiency payment. In CY 2014, combined support payments of 948 billion Korean Won (USD 901 million) were received from both direct payment systems. It was the first time in four years to make a deficiency payment to farmers. An explanation of how these payments are calculated follows.

Area Payment:This payment is made on a 'per hectare' basis and is calculated using the average area of rice production during the base period 1998-2000. The 2014 area payment was at 900,000 won (USD 856) on average per hectare. Paddy area covered under this support program declined to 835,000 hectare, down 2.3 percent from the previous year. The National Assembly and Korean government have also agreed to raise the area payment for the 2015 crop and beyond to one million Korean Won (USD 951) per hectare.

Deficiency Payment: The deficiency payment is 85 percent of the difference between the national-average market price during the 2014 harvest season (2014 Oct.-2015 Jan.) and the 2014 target price, less the area payment.

In CY 2014, the deficiency payment amounted to 192 billion Korean Won (USD182 million) since the difference between the average harvest price of 2,078 Won (USD 1.98) per kilogram (milled) and the target price of 2,350 Won (USD 2.23) per kilogram (milled) was enough to create a deficiency payment. The weighted averaged area payment of 905,389 Won per hectare is converted to a kilogram equivalent (179 Won/Kg) by dividing it by the 1999-2003 Olympic average yields*, which was increased to 5,040 MT per hectare from the previous 4,880 MT in CY 2012.

Due to lower farm gate prices target price during the harvest season, farmers received deficiency payments in CY 2014. The deficiency payment calculation is shown as below.

[(Target Price W/kg - Average Harvest Price W/kg) x .85] - Area Payment per HA /Avg. National Yield per HA

[W 2,350 – W 2,078] x .85] – W 800,919/5,040 MT = W 53 per kilogram

Note: *Olympic average yields: an average during a 5-year period, dropping the highest and lowest values.

Government Rice Purchase Program under the Public Food Grain Stockholding Program (PFSP):

The government purchases rice to ensure food security and price stability. Under the Public Food Grain Stockholding Program (PFSP), the Korean government procures domestic paddy rice during the harvest season (October-December) at the average market price and later sells it during the non-harvest periods at the prevailing domestic market price. For October - December 2014, the Korean government purchased 533,000 MT (milled basis) of paddy rice which included additional purchases of 180,000 MT to stabilize harvest pressure caused by another bump crop, or 13 percent of the 2014 rice production under PFSP. The government procurements almost achieved the initial target of 550,000 MT, paying high enough prices to farmers thanks to bullish market trends under the program. The Korean government pledged to purchase 60,000 MT in addition to 533,000 MT, propping up farm gate prices.

Additionally, the government purchased 30,000 tons for the APTERR (ASEAN Plus Three Emergency Rice Reserve), which was established to provide member countries with rice in the event of natural disasters. The total amount of rice agreed upon in July 2013 by the 13 member countries and stored in reserve was 787,000 metric tons, including 150,000 metric tons promised by Korea.

Rice Millers Purchase:

Rice Processing Complexes (RPC), Korean rice millers, has purchased two million tons (milled basis) of paddy rice under the National Agricultural Cooperative Federation (NACF) loan program to rice millers at a free loan rate during the harvest season. NACF member RPCs purchased 1.6 million tons and independent RPCs 0.4 million tons. The Korean government also supports rice millers to purchase paddy rice under an incentive loan program at a loan rate ranging from zero to two percent according to RPCs evaluation based on government guidelines.

Consumption:

MY 2015/16 consumption is forecast at 4.4 million tons, slightly down 4 percent from the estimates of the current marketing year. Imported rice constitutes about 9 percent of total consumption.

Korean consumers prefer short grain table rice and 79 percent of domestic production (all short grain) was consumed as table rice in MY 2013/14. Per capita table rice consumption continues to decline as eating habits change due to rising incomes and the growing popularity of Western foods. Annual per capita table rice consumption reached its peak at 136.4 Kg in 1970 and has gradually declined to 65.1 Kg in MY 2013/14 according to preliminary government statistics. FAS/Seoul forecasts per capita table rice consumption at 62.7 Kg in MY 2015/16 based on declining consumption trends for table rice.

Although processing accounts for only about 12 percent of total rice domestic consumption, consumption of rice for food processing has maintained growth in the past few years. However, in MY 2014/15, Korea's food processing industry is expected to remain stagnant at 460,000 tons of rice (milled), while liquor processing is volatile due to consumption of rancid rice in old stocks.

Korea: Rice Utilization Pattern

(1,000 MT, milled)

Rice Year (Nov. - Oct.)

MY 2012/13a/

MY 2013/14b/

MY 2014/15c/

MY 2015/16d/

Table Rice

3,435

3,3403,354

3,280

3,220

Processing

526

535

550

600

(for food)

(470)

(457)

(460)

(460)

(for liquor)

(56)

(78)

(90)

(140)

Seed

36

35

35

35

Other and Loss

494

512

583

500

Total Demand

4,491

4,422

4,448

4,355

Per Capita Table Rice Consumption (Kg)

67.2

65.1

63.9

62.7

Source: Ministry of Agriculture, Food and Rural Affairs (MAFRA)

a/ Revised b/ Preliminary c/ Forecast d/ FAS/Seoul forecast

Korea: Processing Rice Consumption Pattern

(1,000 MT, milled)

Purpose

MY 2010/11

MY 2011/12

MY 2012/13 a/

MY 2013/14 b/

KRFA

234

248

246

227

KALIA

244

148

56

78

Others c/

166

170

224

238

Total

644

566

526

535

Source: Ministry of Agriculture, Food and Rural Affairs (MAFRA)

a/ MAFRA Revised

b/ MAFRA Preliminary

c/ traditional foods or beverage made of local rice.

Note: Korea Rice Foodstuffs Association (KRFA), Korea Alcohol & Liquor Industry Association (KALIA)

Korea: Rice Supply for Processing Purposes to KRFA Members

(Metric Ton, Milled)

Calendar Year

Local Rice

Imported Rice

Total

1996

130,632

3,000

133,632

1997

30,171

57,957

88,128

1998

933

77,259

78,192

1999

0

74,214

74,214

2000

0

67,112

67,112

2001

0

66,850

66,850

2002

79

73,884

73,963

2003

306

84,851

85,157

2004

249

91,624

91,873

2005

215

96,020

96,235

2006

67

97,250

97,317

2007

210

101,064

101,274

2008

572

109,552

110,124

2009

806

131,344

132,150

2010

24,887

154,821

179,708

2011

125,910

108,215

234,125

2012

147,462

100,249

247,711

2013

118,344

127,544

245,888

2014

63,654

162,893

226,547

Trade:

The Korean government submitted a draft containing modifications and rectifications to "Schedule LX - Republic of Korea" to the WTO on September 30, 2014, which allowed Korea to implement ordinary customs duties on rice beginning January 1, 2015. However, five countries reserved their positions with respect to the proposed rectification and modification of the Republic of Korea's tariff schedule concerning rice market access. Korea is expected to engage in bilateral discussions with the concerned countries for settlement of the issue.

As agreed to during the special treatment under the Minimum Market Access agreement (MMA) which ended on December 31, 2014, Korea will continue to import the mandatory import volume of 408,700 metric tons from Most Favored Nation (MFN) countries at the current duty level of 5 percent under the tariff rate quota (TRQ) regime in 2015 and beyond. Korea deleted provisions about usage purpose, such as the ratio of table rice (30 percent), guaranteed access to the domestic market, etc.

Imports:

MY 2015/16 rice imports are forecast at about 410,000 tons (milled). Korea is forecast to continue purchasing 408,700 tons (milled) of rice under Most Favored Nation (MFN) quota allocations.

In MY 2014/15, rice imports are expected at 560,000 metric tons consisting of 220,000 MT imported under the 2014 MMA and the remainder of the volume expected to be delivered under the 2015 Tariff Rate Quota (TRQ). U.S. rice exports are expected to stay around 150,000 metric tons, including 34,000 metric tons contracted under the 2014 MMA and an expected volume to be contracted under the 2015 TRQ purchasing plan released by the Korean government.

In MY 2013/14, Korea's rice imports were at 313,419 MT, consisting of 122,574 MT imported under the 2013 MMA quota and 190,845 MT imported under the 2014 MMA quota, respectively. In CY 2014, U.S. exports to Korea amounted to 37,662 MT, which is composed of 11,700 MT imported under the 2013 MMA quota and 25,962 MT imported under the 2014 MMA quota, respectively.

2015 TRQ Purchasing plan:

Under the 2015 Tariff Rate Quota (TRQ) purchasing plan, Korea will purchase 408,700 MT of rice (milled basis) as rice tariffication took effect on January 1, 2015.

Purchasing Schedule: January – October 2015 (in principle, purchase bidding will be held once or twice per month, but is adjustable as needed).

Delivery shall be completed by December 31st 2015.

Bidding method: Public open tender (Details of bidding requirements such as quantities, varieties and grades will be released by individual bidding invitation)

2015 TRQ Tendering Process:

Under the 2015 TRQ thus far, Korea has bought 112,897 MT of brown rice for processing purposes (equivalent to 101,607 MT on milled basis), or 26 percent of the total 2015 TRQ, consisting of 27,000 MT of medium grain brown rice (24,300 MT on milled basis) from the United States, 55,897 MT of short grain brown rice (50,307 MT on milled basis) from China and 30,000 MT of long grain brown rice (27,000 MT on milled basis) from Vietnam, respectively.

Korea: 2015 MMA Rice Tender Results

(as of March 30, 2015)

Bid Date (mm-dd-yy)

Rice Type

Volume (Contract Basis)

Volume (Milled Rice Basis)

Origin

Price (US$/MT)

Terms and Conditions

delivery Due

Agent

Supplier

1/28/2015

MG #3 Brown

5,000

4,500

USA

786.00

CIP

20150531

Seo-Mok

ADM

1/28/2015

LG #3 Brown

15,000

13,500

Vietnam

442.00

CIP

20150430

Daewoo

Vinafood1

1/28/2015

LG #3 Brown

15,000

13,500

Vietnam

449.60

CIP

20150630

Daewoo

Vinafood1

2/26/2015

SG #3 Brown

22,000

19,800

China

870.00

CIP

20150531

Daewoo

COFCO

2/26/2015

MG #3 Brown

22,000

19,800

USA

856.00

CIP

20150531

Seo-Mok

ADM

3/24/2015

SG #3 Brown

12,000

10,800

China

879.85

CIP

20150630

Singsong

Jilin Grain

3/24/2015

SG #3 Brown

10,000

9,000

China

879.95

CIP

20150630

Singsong

Jilin Grain

3/24/2015

SG #3 Brown

11,897

10,707

China

890.00

CIP

20150930

Daewoo

COFCO

Total

112,897

101,607

Source: Korea Agro-Fisheries and Food Trade Corporation (aT)

2014 MMA Tendering Results:

Korea purchased a total of 408,700 metric tons (MT) of rice (milled basis) from the United States, China, Thailand, Australia, Vietnam and India. The U.S. share was 15 percent, half of the previous year due to less competitive pricing caused by drought in California, with contracts totaling 60,067 MT (milled) worth US$ 62 million. U.S. contracts of 17,299 MT were brown rice (equivalent to 15,569 MT on milled basis) for food processing purpose, while the remaining 44,507 MT was milled rice for table purpose.

Auctions:

Korea Agro-Fisheries & Food Trade Corporation (aT) sells table rice shipments through a public auction system, while the Ministry of Agriculture, Food and Rural Affairs (MAFRA) distributes processing rice to end-users such as food processors and alcoholic beverage producers at a set price throughout the year.

In response to increased consumer confidence in U.S. medium grain milled rice, aT started selling U.S. medium grain rice of both USDA No. 1 and USDA No. 3 grades under the 2013 MMA around July 2013, completely selling out of USDA No. 3 U.S. Medium grain milled rice of 6,229 metric tons on October 13, 2014 and USDA No. 1 U.S. Medium grain milled rice of 61,188 metric tons on December 24, 2014, respectively. aT expected to begin selling U.S. milled rice imported under the 2014 MMA in January 2015 as an initial cargo of 4,451 metric tons of USDA No. 3 grade arrived in Korea at the end of 2014. However, West Coast port disruptions caused the selling auctions of U.S. medium grain to delay until early February 2015.

Progress in auctioning rice of other origins has been comparably slower than U.S. rice. Selling auctions for Chinese milled rice are still pending at 4 percent for USDA No. 1 grade under the 2014 MMA with Thai milled rice ongoing at 58 percent for USDA No. 1 under the 2013 MMA, respectively.

Korea: Status of Rice Auction for Table Rice under 2014 CSQ

(Unit: metric tons, milled basis, as of March 23, 2015)

Commodity

USDA

Grade

Total Table Rice CSQ

Auctioned Off

Balance

Auctioned Off

(%)

U.S. Medium Grain

#1

40,056

2,013

38,043

5

#3

4,451

3,216

1,235

72

Chinese Short Grain

#1

47,965

1,680

46,285

4

#3

21,433

0

21,433

0

Australian Medium Grain

#1

2,697

0

2,697

0

#3

2,698

0

2,698

0

Thai Long Grain

#1

3,220

0

3,220

0

Thai Jasmine Rice

#1

90

0

90

0

Total

122,610

6,909

115,701

6

Exports:

Korea has exported a negligible amount of rice to other countries. In CY 2014, Korea exported 1,684 MT of milled rice with Australia importing 693 MT, or 41 percent of total rice imports, followed by 41 other countries. The U.S. imported 123 MT of Korean rice for the period. As of March 11, 2015, Korea revised relevant regulations to allow rice export without restrictions as the Korean rice market was liberalized on January 2015. Rice exports had been subject to the Agricultural Minister's recommendation prior to rice market liberalization.

Korea: Rice Export (Milled)

To the World

To the United States

Calendar Year

Quantity (MT)

Value (US$1,000)

Quantity (MT)

Value (US$1,000)

2005

18

89

5

5

2006

9

40

0.2

1

2007

507

1,322

333

876

2008

356

829

115

285

2009

4,183

7,300

443

777

2010

3,765

6,394

272

587

2011

3,782

6,277

161

244

2012

2,223

4,424

90

185

2013

1,517

3,363

86

180

2014

1,684

3,894

123

303

Stocks:

MY 2014/15 ending stocks (at the end of October 2015) are expected to increase to about 1.25 million tons or 28 percent of total consumption due to consecutive bump crops. MY 2015/16 stocks (at the end of October 2016) are forecast at 1.3million tons or 30 percent of total domestic consumption.

Korea: Status of Rice Stocks

(Milled rice, 1,000 MT, as of end October)

Rice Year (Nov.-Oct.)

2010/11

2011/12

2012/13a/

2013/14b/

2014/15c/

2015/16c/

Total

1,034

730

780

899

1,250

1,303

Government Stock

984

730

780

899

1,250

1,303

-Domestic Rice

696

462

na

na

na

na

-Imported Rice

288

268

na

na

na

na

Civil Stock

50

0

0

0

0

0

Source: FAS/Seoul Estimate based on MAFRA data – starting 2007/08 there has been difference between Post & FAS estimates

a/ MAFRA Preliminary

b/ FAS/Seoul Preliminary

c/ FAS/Seoul forecast

Rice PS&D

Rice, Milled

2013/2014

2014/2015

2015/2016

Market Begin Year

Nov 2013

Nov 2014

Nov 2015

Korea, South

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

833

833

816

816

0

801

Beginning Stocks

780

780

861

899

0

1,250

Milled Production

4,230

4,230

4,241

4,241

0

4,000

Rough Production

5,632

5,632

5,638

5,638

0

5,318

Milling Rate (.9999)

7,511

7,511

7,522

7,522

0

7,522

MY Imports

313

313

410

560

0

410

TY Imports

372

379

450

470

0

410

TY Imp. from U.S.

33

38

0

150

0

120

Total Supply

5,323

5,323

5,512

5,700

0

5,660

MY Exports

2

2

2

2

0

2

TY Exports

2

2

2

2

0

2

Consumption and Residual

4,460

4,422

4,450

4,448

0

4,355

Ending Stocks

861

899

1,060

1,250

0

1,303

Total Distribution

5,323

5,323

5,512

5,700

0

5,660

1000 HA, 1000 MT, MT/HA