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Structural Transformation in Korean Agriculture: Changes and Challenges (Year 1 of 2)
Author Rhew, Chanhee
Views 73929 Publication Date 2020.03.04
Original
Research Background
Although agricultural restructuring policies have been pursued since the 1980s, today's agricultural structures are very different from what was expected. This means that the policy alone has limits in shaping the desired agricultural structure, and the internal and external drivers that affect the agricultural structure are different from the past. At the same time, many agricultural management organizations have adapted and responded to changing conditions.
The reason for investigating the changes in agricultural structure in this study is to find a kind of tendency when we see the structural characteristics of agricultural management entities at the micro-level. It is necessary to understand how these trends are changing, and to analyze the problems of agricultural management to respond appropriately to changes in agricultural structure.
In the first year of study, we analyzed the current state of changes in agricultural structure and identified the drivers of changes. Because the agricultural structure is dynamic in nature, we determined that the cumulative or emerging conditions and drivers, the management form of the agricultural management entities, and the conditions restricting the decision of the agricultural management entities were combined and affected the agricultural structure. Although it is referred to as the agricultural structure, it was approached with the view that the aspects would vary depending on the characteristics and composition of the agricultural management entities, the characteristics of the items, and the available production factors.

Research Methodology
In the course of this study, we mainly conducted literature studies and statistical data analysis. In reviewing previous studies, the definition and scope of agricultural structure was established. It was used to establish the viewpoint and framework of the agricultural structure.
 We conducted research on policy changes related to agricultural structure in Japan and compared them with changes in Korean agricultural structure to draw implications. A survey on farmers' awareness of changes in agricultural structures was conducted. We have identified farmers' perceptions of policy changes and policy demands. And we will to use these in second year of research.

Findings
The agricultural structure was defined as “a combination of the labor force, farmland and capital,” which are the main production factors in the agricultural sector. Individual agricultural management organizations will choose the most productive option based on their conditions, the number of reserves and available resources. As a result of these decisions and the allocation of resources, the linkages between factors of production change. This transformation is manifested in a change in the management form of agricultural management bodies.
One of variables influencing agricultural management decisions is which options are more productive. Another variable is which individual agricultural management can choose from these options. Agricultural management makes decisions that change the association of factors of production in two broad categories. One way is to improve productivity within the agricultural management entities. This approach is further divided into enlargement, concentration, concentration and employment of employment labor. On the other hand, if it is difficult to increase productivity at the agricultural management level, farmers may choose to organize or to diversify from other income activities.
As the country's overall economy developed, farm households and farm populations shrank by 1.8% and 3.7%, on average, between 1970 and 2018. The outflow of young farming population accelerated the aging of the farming population. This change can also be confirmed by the fact that the age group, which has the largest proportion of the farm population. Also, the average number of farmers with farming successors in 2011-2014 was 10,863, which was only 9.6% of the farms.
The amount of farmland decreased by 0.8% per year from 223,692 ha in 1975 to 1,159,614 ha in 2018. In particular, the use of farmland has changed while the rice area is rapidly decreasing. First of all, the increase in the lease was noticeable. From 1995 to 2016, the share of rented farmland increased from 42.2% to 51.4%, but the share of rented farm households decreased from 71.3% to 56.4%. In terms of management size, farmers with large farmland generally had a high share of rents, while farmers with small management scales had a high share of commission. Even if there is a competition between renting and consignment farming, both trend can slow down the enlargement of rice farming

Labor and land inputs decreased, while agricultural fixed capital and intermediate inputs increased. In addition to agricultural machinery, fixed capital input for agriculture (excluding land) has steadily increased. From 1990 to 2018, the degree of intensity of capital, capital composition, and capital coefficient shows that increasing trend. Since the 2000s, the capital coefficient has slowed down, indicating that the effect of capital production per unit output is decreasing. On the other hand, the fact that capital intensity and capital composition are steadily increasing shows that capital-intensification increasing and replacing the agricultural labor force.
The main purpose of implementing the agricultural restructuring policy was to increase the amount of arable land per agricultural management entities to increase total production and to strengthen price bargaining power, and to raise price competitiveness by lowering production cost or management cost per unit area. Nevertheless, the effects of restructuring policies differed by item.
The structural changes in the rice sector are characterized by “polarization of farming size, increasing share of rice paddies among large scale farms, and generalization of consignment work.” The main reasons are that standardization of technology, mechanization and consignment work that allow older farmers to continue farming, and farmers with difficulty in earning income from non-farm sector usually farm the rice, and the influence of income stabilization policies.
The change in the structure of the vegetable sector is characterized by the "specialization of some farmers in the overall decline in production." Vegetables such as peppers and onions will be limited in supply because consumption is decreasing.
The structural change of the livestock sector is characterized by “upward concentration and full-time work of livestock.” A new entry may be limited because large capital investments require full-time employment. Economies of scale can be expected, but at the same time management risks can increase. It is also the reason why the systemization of livestock is increasing.
The common problems from agricultural structure changes are as follows. First, the number of farming population goes down. Second, young farmers have difficulty in retaining elements of production. Third, the proportion of rented farmland is increasing in terms of farmland, especially rice farms. As rent increases, the burden of land service costs increases and agricultural income rate decreases, which may slow down the scaling improvement. Last, the consumption of some staple crops continues to decline, but supply is not changing in time.

Given the changes in the agricultural structure and the problems, enlargement methods would be ineffective. Intensification methods will also face limitations. This is because capital input and supply and demand for hired labor force are constraints of intensification. This problem will be especially evident in the horticulture and livestock sectors.
In this regard, we should concentrate on diversification and organization in a way that responds to changes in the agricultural production structure in the future. Diversification will continue to function as a valid strategy for some time to come. Rural conditions (jobs, for example) are also significant, but at the same time, the number of household members who can participate in various activities is essential. A organization can also serve as a mechanism for solving problems at individual agricultural management units. However, as confirmed by the agricultural corporation or village farming example, there is a limit to solving the problem by merely collecting individual farms.
In this trend, the agricultural structure in the future need to develop differently. If so, the farm will also continue to respond to changes at the micro-level. It is still important to anticipate these changes and design the policies needed to mitigate the problems or constraints. However, strengthening competitiveness may be one of the options that the agricultural sector can take. However, it may not be the only method. Instead, it may be a “structural improvement” to recognize the diversity of agricultural management and to relieve constraints that farms face.


Researchers: Rhew Chanhee, Kim Jeongsup, Kim Taehun, Choi Yongho, Oh Naewon, Park Jiyeon, and Im Junhyeok
Research period: 2019. 1. ~ 2019. 12.
E-mail address: chrhew@krei.re.kr

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