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  1. 1. Agricultural Finance and Marketing System in Korea Wan-Seok Park [email_address] Senior Manager Ag Finance Department NACF, South Korea 2007. 3. 15 .
  2. 2. Contents Statistics on Farm Affairs in Korea 1 2 Ag-Coop System 3 Agricultural Finance 4 Agricultural Marketing
  3. 3. Statistics of Farm Population (Unit:Thousand KRW) ※ Number of family members per farm household: 6.3  2.75 2006 1965 classification 55.1% 15,812 28,705 51.5% 2,507 4,844 7.1% Proportion (b/a) Population 48,294 Total (a) 3,433 Farm Population (b) 8.0% Proportion (b/a) 1,273 Farm Household (b) 15,887 Total (a) Household
  4. 4. Age Groups of Farm Operators 2006 1981 100 21.5 27.3 46.1 5.1 % 2,030 435 555 936 104 Numbers (Thousand) 100 1,240 Total 59.1 734 Over 60 23.1 286 50~59 17.6 218 30~49 0.2 2 Under 30 % Numbers (Thousand) Age
  5. 5. AGRICULTURE’S CONTRIBUTION TO GNP (%) Agriculture’s contribution to GNP Year 1980 10.7% Year 2006 3.1% Contribution of Agriculture to GNP
  6. 6. <ul><li>Multi-purpose </li></ul><ul><li>Central Role in Cooperative Movement in Korea </li></ul><ul><li>Two-tier System </li></ul><ul><li>Implement Agricultural Policy for Government </li></ul>Characteristics of the Ag-Coop
  7. 7. Subsidiaries of the NACF <ul><li>Agricultural Cooperative College </li></ul><ul><li>The Farmers Newspaper </li></ul><ul><li>The Namhae Chemical Corporation </li></ul><ul><li>Korea Agricultural Marketing, Inc. </li></ul><ul><li>Korea Agricultural Trading Co.,Ltd. </li></ul><ul><li>Nonghyup Tours </li></ul><ul><li>The NACF Futures Corporation </li></ul><ul><li>Korea Coop-Agro, Inc. 9. Korea Samhyup Co.,Ltd. </li></ul><ul><li>10. Nonghyup Korea Ginseng Co. 11. Nonghyup Feed Inc. </li></ul><ul><li>12. Nonghyup CA Asset management Co.,Ltd. </li></ul><ul><li>13. Agricultural Cooperative Asset Management Co.,Ltd. </li></ul><ul><li>14. NH Investment & Securities </li></ul>
  8. 8. Agricultural Finance System Policy Loan Mutual Loan Commercial Loan Farm Operators Nonghyup MAF Policy Fund Loan Payback Farm Operators Customers Commercial Fund Mutual Fund Ag Credit Guarantee Fund Fund for Loss Compensation
  9. 9. Systems to Facilitate Lending to Farm Operators <ul><li>Agricultural Credit Guaranty Fund </li></ul><ul><li>- Simple credit analysis for issuing Letter of Guarantee </li></ul><ul><li>up to KRW 50 million per farm household </li></ul><ul><li>Credit Loan System </li></ul><ul><li>- Up to KRW 15 million per farm household </li></ul><ul><li>Fund for Loss Compensation </li></ul><ul><li>Agricultural Mutual Fund/ Policy Fund </li></ul><ul><li>- Balance of AML in 2005 : KRW 127 trillion </li></ul><ul><li>- Balance of PL in 2005 : KRW 27.7 trillion </li></ul>
  10. 10. Profile of Main Farm Loans Farm Facility Farm Operation Family Living 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
  11. 11. Integrated Farm Loan (IFL) System Help farm operators to achieve their goals Integrated Farm Loan System Consultation Loan Appraisal & Lending Credit Analysis Loan Counsel
  12. 12. Types of Consulting Services Book Keeping Risk Forecast Loan Payment Financial Plan Financial Diagnosis Price Info. Investment Analysis Loan Program NACF Consulting Services Before Investment After Investment <ul><li>- Feasibility of Investment </li></ul><ul><li>Facility-loan Programs </li></ul><ul><li>Future Price of FP </li></ul>Interests of FO <ul><li>- Profitability </li></ul><ul><li>- Effective Management </li></ul><ul><li>Operational-loan Programs </li></ul><ul><li>Loan Payment Schedule </li></ul>(Financial aspect)
  13. 14. Price Analysis System
  14. 15. Financial Planning (Budgeting) <ul><li>Planning tool that contains estimates of production costs and returns based on the current or expected economic environment </li></ul>Enterprise 1 Budgeting Enterprise 2 Budgeting Enterprise 3 Budgeting Monthly Cash Flow Monthly Debt Payment Schedule F/S Financial Stress Test & Grouping Property Information Debt Information
  15. 16. Book Keeping Software
  16. 17. Rural economy (non - ag) (Customer driven) Bulky Face to face transaction Manual shipping Changes in Agricultural Marketing Collector, Traditional Market Big Retailer Sorted & Standardized products Brand names, POS, EDI Machine, palletizing
  17. 18. (Food system) Rural economy (non - ag) (Customer driven) Producer(farmer) Collector Shipper Wholesaler New Agricultural Marketing System Conventional System New System Producer(farmer) APC(201) AMC Consumer 6 steps 4 steps Retailer Consumer
  18. 19. <ul><li>Chemical Fertilizers, </li></ul><ul><li>Agro-chemicals, </li></ul><ul><li>Farm Machinery, Feedstuff, </li></ul><ul><li>Petroleum, Tax-free farm fuels </li></ul><ul><li>Stable & timely supply at reasonable prices </li></ul><ul><li>Agro-chemical and fertilizer companies </li></ul><ul><li>Seedling center </li></ul>Providing farm supplies
  19. 20. <ul><li>A modernized marketing facility conducting various post-harvest processes </li></ul><ul><li>ex) Drying, storing, processing, and </li></ul><ul><li> packaging of rice </li></ul><ul><li>Value added process </li></ul><ul><li>Number of RPCs run by Nonghyup : 181 </li></ul>Rice Processing Complexes(RPC) packaging drying
  20. 21. <ul><li>Agricultural Produce Complex (APC) : 201 </li></ul><ul><li>- Pre-cooling, pre-drying, sorting, storing, </li></ul><ul><li>packaging, cleaning </li></ul><ul><li>Collection Points : 1,943 </li></ul>Development of Post-harvest Technology
  21. 22. <ul><li>Marketing centers in urban areas as an alternative distribution channel </li></ul><ul><li>Similar to large supermarket or discount stores </li></ul><ul><li>Transaction based on private contract with producers, not based on auction </li></ul><ul><li>Engaged in both retail and wholesale </li></ul>Agricultural Marketing Complexes (AMC)
  22. 23. <ul><li>First introduced in 1970 </li></ul><ul><li>Hanaro Marts (retail outlets) : 2,183 stores </li></ul><ul><li>- Unique cooperative stores </li></ul><ul><li>Internet commerce : 1,395 items </li></ul>Retail business (Hanaromarts) Hanaromart Distribution center
  23. 24. <ul><li>Cyber-marketing </li></ul><ul><li>- KRW 95.5 billion in 2005 </li></ul><ul><li>POS (Point of sales) System </li></ul><ul><li>EDI (Electronic Data Interchange) </li></ul>E-commerce
  24. 25. <ul><li>Analysis of pesticide residue </li></ul><ul><li>- Food safety center </li></ul><ul><li>Education on food safety </li></ul><ul><li>issues & the use of pesticides </li></ul><ul><li>Traceability : HACCP/GAP </li></ul><ul><li>* Beef History Tracking System </li></ul>Food safety & consumer protection
  25. 26. <ul><li>Transport farm products to the collecting points, eg. cooperative marketing centers or processors </li></ul><ul><li>Advance payments to farmers for consigned commodities - financial support </li></ul><ul><li>Dissemination of agricultural marketing information to producers </li></ul>Role - Member Cooperatives
  26. 27. <ul><li>Planning and guidance services for cooperative marketing </li></ul><ul><li>Operation of cooperative marketing centers </li></ul>Role – the NACF (Federation)
  27. 28. New Trends of Marketing and Extension <ul><li>Promoting brands for farm products </li></ul><ul><li>- 168 brands, 20 leading brands </li></ul><ul><li>Agricultural Coupons(’05) : KRW 317 billion </li></ul><ul><li>Self-help Funds (’05) </li></ul><ul><li>- Cow : KRW2.8 billion, Pig : KRW 5 billion, </li></ul><ul><li>Dairy : KRW 5 billion </li></ul><ul><li>Special days for product-eating </li></ul><ul><li>- White day, Duck day, Gu-Gu day, Apple day… </li></ul><ul><li>HACCP(Hazard Analysis Critical Control Point) </li></ul><ul><li>- 71 butcheries and processing plants </li></ul><ul><li>Livestock Consulting System </li></ul><ul><li>Production Quota on each farm household </li></ul>
  28. 29. Thank you