The government is running Purchase and Reserve System to purchase storable agricultural products during the main sale seasons to support farm price and Import and Reserve System to reserve imported products which is not sufficient for supply and demand only by domestic production. From nowadays, liberalization of agricultural market is accelerating and self-controling function of producer group for supply and demand is considering more importantly that suggestion of an objective evaluation and development strategy is necessary. Therefore, this study identifies problems and analyzes effect of Reserve System -related to chillie, garlic, onion, sesame, soybean and red bean- running by government through state trading using KREI-KASMO. In addition, we suggest improvement of evaluation indicators and seek development plans for Reserve System.
In this study, we pointed out some problems of Reserve System such as decreasing domestic acreage, incomplete self-controling function of producer group for supply and demand and continuous increase in reserve cost and TRQ handling of private sector.
We implemented post evaluation(such as producer's surplus and consumer's surplus) based on the estimation of the domestic market price change according to the change of market supply caused by Reserve System in the past using KREI-KASMO 2011 model. In this analysis, we excluded government revenues from the Reserve System. And for the effect analysis of Reserve System, we supposed that there was no reserves in the past(made a scenario) based on the past governments' reserve quantities(baseline). The result of the analysis shows that social welfare of Purchase and Reserve System for soybean and garlic during the recent six years(2006~2011) was estimated to 6,770 million won. On the other hand, social welfare of Import and Reserve System for 6 products during the recent six years(2006~2011) was estimated to 945.5 billion won.
The Reserve System is highly likely to be undervalued by using current evaluation indicators. To solve this problems, C.V.(coefficient of variation) of off-season wholesale prices is considered for an alternative. As a result of new evaluation indicators, 2009/10 target value of Reserve System was not accomplished, but 2010/11 target value was accomplished.
Operation of the reserve system can be improved if 1) some amount from contract cultivation can be used for Purchase and Reserve System, especially Chinese Cabbage, 2) diversification of import management and establishment of a foreign corporation are considered for Import and Reserve System, and 3) professionalism of Reserve System management is required.


Researchers: Byoung-Ok Choi, Suk-Ho Han, Jun-ho Seung and Urim Cho
Research period: 2011. 12. - 2012. 5.
E-mail address: bochoi@krei.re.kr