The multinational grain traders, the, so-called, "grain majors," have been dominating in the international grain market, dealing with 80% of the global grain trade. At the same time, approximately 60% of Korea's grain imports has been supplied by them. Thus, the entire Korean grain import system under the influence of international market circumstances needs to be scrutinized. The objective of this study is to suggest alternative import strategies by considering the international grain industry and analyzing successful bidding prices in the Korean grain tenders between 2003 and 2008.
The result of a cointegration analysis shows that there is a cointegration relationship between international grain prices and Korea's import tender prices, which implies that hedging in the futures market would be effective. Moreover, most of the volatility of international grain prices has been absorbed into the Korean grain import market, and there has not been an appropriate policy or strategy in the Korean grain industry.
Furthermore, on average, the grain majors' market share has been over 60% for wheat, corn, and soybean, and it is on an increasing trend. The results from regression, simple statistic, and the origin related to practical suppliers analyses indicate that the grain majors supplied corn (wheat) at a lower (higher) price than non-majors in the entire period of the analysis. However, in the case of soaring international grain prices, the grain majors supply corn and wheat at much higher prices than non-majors. In addition, considering average prices, standard deviations, and variation indices, the grain major's prices have been relatively stable. In particular, when the international grain prices are skyrocketing, the grain majors market share increases dramatically.
Meanwhile, Korea's dominant grain import strategy has been C&F Flat transaction. It is a simple way of purchasing grains, selecting lowest price in a public open tender. As a result, there is no way to disperse the risks coming from the international market. Thus, this study makes several suggestions: 1) utilize basis transactions in the international market, 2) make the best use of futures market based on the basis transaction, 3) initiate direct purchase system in major grain-producing countries, and 4) enhance government's role in the domestic grain industry.