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Agricultural Finance and Marketing System in Korea

Agricultural Finance and Marketing System in Korea. 2007. 3. 15. Wan-Seok Park enogs@hanmail.net Senior Manager Ag Finance Department NACF, South Korea. 1. Statistics on Farm Affairs in Korea. 2. Ag-Coop System. 3. 4. Agricultural Finance. Agricultural Marketing. Contents.

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Agricultural Finance and Marketing System in Korea

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  1. Agricultural Finance and Marketing System in Korea 2007. 3. 15 . Wan-Seok Parkenogs@hanmail.net Senior ManagerAg Finance DepartmentNACF, South Korea

  2. 1 Statistics on Farm Affairs in Korea 2 Ag-Coop System 3 4 Agricultural Finance Agricultural Marketing Contents

  3. Statistics of Farm Population (Unit:Thousand KRW) ※ Number of family members per farm household: 6.3  2.75

  4. Age Groups of Farm Operators

  5. Contribution of Agriculture to GNP (%) Agriculture’s contribution to GNP Year 1980 10.7% Year 2006 3.1% AGRICULTURE’S CONTRIBUTION TO GNP

  6. Characteristics of the Ag-Coop • Multi-purpose • Central Role in Cooperative Movement in Korea • Two-tier System • Implement Agricultural Policy for Government

  7. Subsidiaries of the NACF • Agricultural Cooperative College • The Farmers Newspaper • The Namhae Chemical Corporation • Korea Agricultural Marketing, Inc. • Korea Agricultural Trading Co.,Ltd. • Nonghyup Tours • The NACF Futures Corporation • Korea Coop-Agro, Inc. 9. Korea Samhyup Co.,Ltd. • 10. Nonghyup Korea Ginseng Co. 11. Nonghyup Feed Inc. • 12. Nonghyup CA Asset management Co.,Ltd. • 13. Agricultural Cooperative Asset Management Co.,Ltd. • 14. NH Investment & Securities

  8. Ag Credit Guarantee Fund Fund forLoss Compensation Agricultural Finance System Farm Operators Mutual Fund Commercial Fund Customers MAF Policy Fund Nonghyup Policy Loan Mutual Loan CommercialLoan Payback Loan Farm Operators

  9. Systems to Facilitate Lending to Farm Operators • Agricultural Mutual Fund/ Policy Fund • - Balance of AML in 2005 : KRW 127 trillion • - Balance of PL in 2005 : KRW 27.7 trillion • Credit Loan System • - Up to KRW 15 million per farm household • Agricultural Credit Guaranty Fund • - Simple credit analysis for issuing Letter of Guarantee • up to KRW 50 million per farm household • Fund for Loss Compensation

  10. Integrated Farm Loan (Policy Loan) - Mostly for large farm operators - For the use of farm purchase, facility installations, repairs, maintenance, operation, etc. - Balance in 2006: KRW 2,143 billion Farm and Livestock Management Loan (Policy Loan)- Mostly for small farmers - For the use of farm and livestock operations - Balance in 2005: KRW 3,800 billion Agricultural Mutual Fund- For all farmers - For the use of family living and farm production - A kind of commercial loans Profile of Main Farm Loans Farm Facility FarmOperation FamilyLiving

  11. Loan Appraisal & Lending Loan Counsel Consultation Credit Analysis Integrated Farm Loan (IFL) System Integrated Farm Loan System Help farm operators to achieve their goals

  12. BeforeInvestment AfterInvestment Interests of FO (Financial aspect) • - Feasibility of Investment • Facility-loan Programs • Future Price of FP • - Profitability • - Effective Management • Operational-loan Programs • Loan Payment Schedule NACF Consulting Services Loan Program InvestmentAnalysis PriceInfo. Financial Diagnosis FinancialPlan Loan Payment RiskForecast BookKeeping Types of Consulting Services

  13. Price Analysis System

  14. Enterprise 1Budgeting Enterprise 2 Budgeting Enterprise 3 Budgeting DebtInformation Property Information MonthlyCash Flow Monthly DebtPayment Schedule F/S Financial Stress Test& Grouping Financial Planning (Budgeting) • Planning tool that contains estimates of production costs and returns based on the current or expected economic environment

  15. Book Keeping Software

  16. Changes in Agricultural Marketing Collector, Traditional Market Big Retailer Sorted & Standardized products Bulky Rural economy Brand names, POS, EDI Face to face transaction (non - ag) Manual shipping Machine, palletizing (Customer driven)

  17. New Agricultural Marketing System Conventional System New System 6 steps 4 steps Producer(farmer) Producer(farmer) Collector (Food system) APC(201) Shipper Rural economy Wholesaler AMC (non - ag) Retailer Consumer (Customer driven) Consumer

  18. Providing farm supplies • Chemical Fertilizers, • Agro-chemicals, • Farm Machinery, Feedstuff, • Petroleum, Tax-free farm fuels • Stable & timely supply at reasonable prices • Agro-chemical and fertilizer companies • Seedling center

  19. Rice Processing Complexes(RPC) • A modernized marketing facility conducting various post-harvest processes • ex) Drying, storing, processing, and • packaging of rice • Value added process • Number of RPCs run by Nonghyup : 181 packaging drying

  20. Development of Post-harvest Technology • Agricultural Produce Complex (APC) : 201 • - Pre-cooling, pre-drying, sorting, storing, • packaging, cleaning • Collection Points : 1,943

  21. Agricultural Marketing Complexes (AMC) • Marketing centers in urban areas as an alternative distribution channel • Similar to large supermarket or discount stores • Transaction based on private contract with producers, not based on auction • Engaged in both retail and wholesale

  22. Retail business (Hanaromarts) • First introduced in 1970 • Hanaro Marts (retail outlets) : 2,183 stores • - Unique cooperative stores • Internet commerce : 1,395 items Distribution center Hanaromart

  23. E-commerce • Cyber-marketing • - KRW 95.5 billion in 2005 • POS (Point of sales) System • EDI (Electronic Data Interchange)

  24. Food safety & consumer protection • Analysis of pesticide residue • - Food safety center • Education on food safety • issues & the use of pesticides • Traceability : HACCP/GAP • * Beef History Tracking System

  25. Role - Member Cooperatives • Transport farm products to the collecting points, eg. cooperative marketing centers or processors • Advance payments to farmers for consigned commodities - financial support • Dissemination of agricultural marketing information to producers

  26. Role – the NACF (Federation) • Planning and guidance services for cooperative marketing • Operation of cooperative marketing centers

  27. New Trends of Marketing and Extension • Promoting brands for farm products - 168 brands, 20 leading brands • Agricultural Coupons(’05) : KRW 317 billion • Self-help Funds (’05) - Cow : KRW2.8 billion, Pig : KRW 5 billion, Dairy : KRW 5 billion • Special days for product-eating - White day, Duck day, Gu-Gu day, Apple day… • HACCP(Hazard Analysis Critical Control Point) - 71 butcheries and processing plants • Livestock Consulting System • Production Quota on each farm household

  28. Thank you

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