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Gov't moves to stabilize prices of farm products through direct transactions

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(Globalpost/GlobalPost)

SEOUL, May 27 (Yonhap) -- The government on Monday announced a set of measures, including the expansion of direct transactions between producers and consumers, to limit price hikes of farm products.

The Ministry of Agriculture, Food and Rural Affairs said the measures will help lower distribution costs by an average 10 to 15 percent by 2016.

At the center of the plan is the National Agricultural Cooperative Federation, better known as Nonghyup, which will double its retail sales of farm products from 959.6 billion won (US$847 million) in 2012 to 1.93 trillion won in 2016, also doubling its market share from the current 7 percent to 14 percent over the cited period.

This will help cut the number of stages for the distribution of farm products down to two or three. Currently, farm products go through as many as three retailers before reaching stores and then consumers, nearly doubling their prices.

"This will promote competition between various distribution systems, encouraging them to cut the number of different stages in their systems and thus reducing the overall cost of distribution by 10 to 15 percent," the ministry said in a press release.

Along with increased competition from Nonghyup, retailers will also have to compete with consumers themselves as the government seeks to encourage direct transactions between producers and consumers.

To this end, the government will set up 100 new stores or market places by 2016.

In addition, the government will work to significantly improve the accuracy of its forecasts on the supply and demand of farm products, reducing the possibility of oversupply or undersupply in the market, and thus reducing the possibility of steep price fluctuations as well.

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