“Contracts dried up after late August. Although shipments for the originally contracted volumes have been moving since early October, we do not know what the situation will be next year.”

President Lee Jae-Myung instructed the Ministry of Agriculture, Food and Rural Affairs at the Cabinet meeting on the 9th to review rice export contracts to Japan. Recently Japan has been struggling with a surge in rice prices, while Korea is expected to overproduce rice this year. One side is short and the other has a surplus, so the idea is to try to create a ‘win-win’ deal.

However, policymakers judge that, given various conditions, exports will not be easy right away. Let us examine the reasons one by one.

Japan imposes a tariff of 341 yen per kg on imported rice other than the low-tariff, country-allocated quota rice. The high tariff is intended to protect domestic rice farms. Because of the tariff, imported rice in Japan is structurally at a disadvantage against local rice. For this reason, imports of rice other than the quota rice have been limited to around 600~800 t per year.

This year, however, the situation has shifted a little. As of October, the Japanese rice price hit a record high of 37,058 yen for 60 kg. Retail prices show a similar pattern. As of May, it set an all-time high of 4,285 yen for 5 kg; although it moderated somewhat after the government released reserve rice, it has still hovered in the 4,200-yen range, nearly doubling.

With Japanese rice prices soaring, an opening emerged for Korean rice. In April, Okcheon NongHyup in Haenam, South Jeolla, exported 2 t of rice to Japan for the first time. It was the first time a NongHyup branch had exported rice to Japan. By the first half of the year, the contracted export volume alone reached about 800 t. There were even projections that the export volume would exceed 1,000 t by year-end.

But as the second half began, the momentum slumped sharply. When the Japanese government released reserve rice, Japanese rice prices fell by about 10~20%. According to NongHyup headquarters, of the 800 t contracted for export by the first half, the actual volume exported as of the 9th was 551 t. As price competitiveness weakened, local buyers in Japan asked to postpone shipments. There have been no new export contracts in the second half.

After some stabilization, Japanese rice prices began rising again in October. Inquiries from Japan about rice exports are reportedly resuming sporadically.

However, it is unclear how long this trend will last. The Japanese government believes that temporary hoarding demand fueled the price spike. From a medium to long-term perspective, the rice supply itself is not structurally insufficient. Without adjustments to the tariff rate, it will be difficult for Korean rice to gain more price competitiveness than it has now.

Even the rice currently exported to Japan is effectively being sold at a loss. It is being sold at discounted prices to compete with local Japanese rice. Some local governments are said to provide tangible and intangible support to rice-exporting farms to make up for losses.

An official at NongHyup headquarters said, “If you exclude support provided by local governments when rice is exported, it is effectively in the red. Without lowering the tariff rate, it is structurally difficult to gain price competitiveness,” and added, “Because it is not easy to predict the immediate path of Japanese rice prices, for now we place significance on opening distribution channels.”

Meanwhile, domestic rice prices are also rising, so from the perspective of farmers the export incentive is not large. According to the National Data Office, as of the 25th of last month the farm-gate price for 20 kg of rice was 57,046 won, up 23.9% from a year earlier. Because the government, concerned about oversupply, has isolated 100,000 t from the market, there is little incentive for prices to fall, and a base effect from the low prices last year is also in play.

The agriculture ministry also plans to focus on promoting Korean rice rather than setting an immediate export strategy. Starting on the 12th, the ministry decided to run a pop-up store at Gimpo International Airport for about two months to promote rice. Rice representing the eight provinces nationwide and rice-based processed foods will be sold. This reflects a recent increase in Japanese tourists buying bagged rice in Korea.

An official at the agriculture ministry said, “Because there is no price competitiveness, we judge that exports will not be easy right now, so for now we will focus on instilling in Japanese people the perception that ‘Korean rice also has good taste and quality’.”