It is evaluated that the direct payment programme for rice farmers has achieved its the object, stabilization of income, but it has few problems. Rice price in year 2005 decreased by 13.4% compared to previous year. But the perceived price(rice price including direct payment) was stabilized at the level of 97.3% of target price. But it was argued at few regions that the perceived price was far below the 97.3% of target price. This is because the rice market price differs region to region, and the amount of direct payment is calculated based on national wide price. It is rational the local price is applied to calculate the amount of direct payment. But there can be a wide price variation within a region, the same problem will continue.
The direct payment programme can be restricted because the reduction of Aggregate Measurement Support(AMS) has been discussing. If the target price decreases by an Enforcement Ordinance, then the direct payment programme would be sustainable. At this situation, the rice farm income will decline. The scheme of direct payment programme should be changed for the rice farm income to be stable. If the target price increases by reflecting inflation rate, then the real income of rice farm is sustained. But it may cause the over-production and a budgetary burden.
In the long-run, the direct payment programme for rice farmers should be changed into the direct payment programme to stabilize the farm income. It is planned to make FTAs, then the prices of some agricultural products decrease and income falls.
The policy programme to stabilize the rice farm income was introduced at year 2005. So the disproportion of rice demand and supply must solved by the market function. Before the year 2005, the government intercept the rice market to stabilize the rice price and income. To balance the demand and supply of rice, the condition to defray the variable payment should be changed from production -coupled to decoupled. In the case of over-production, the NACF is recommended to segregate the surplus.
The marketing efficiency must be improved to cope with DDA negotiation. The sales on consignment must be activated to reduce the price fluctuation and stabilize the rice transactions. And the agency to find rice price by quality is required to be established.
Researcher: Park, Dong Gyu
E-mail address: dgpark@krei.re.kr