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The Promotion of Food Processing by Farmers in Korea
Jong-Uck Choi and Heui-Dong Park
Department of Food Science and Technology
Kyungpook National University,
1370, Sankyuk-dong, Puk-gu, Taegu, Korea, 1995-09-01

Abstract

A small-scale food industry is proposed as a means of promoting the development of fishing and rural villages in Korea. In this type of industry, farmers or fishermen participate in food processing and marketing, as well as in the production of raw materials. The major problems and constraints are discussed.

Abstracts in Other Languages: 中文(1132), 日本語(1291), 한국어(1145)

Introduction

The Korean economy has experienced dramatic structural changes since the late 1970's. Rapid industrialization and urbanization have changed the traditional way of life, as well as the whole framework of the economy. Growth of the economy always results in an increase in incomes and encourages the formation of large cities to which people and jobs are attracted. Patterns of consumption change, and consumers tend to prefer fast foods over traditional foods that need more time for preparation. Korea has limited natural resources, and the only way it can become more competitive in international trade is to make more effective use of harvested agricultural products, rather than maximizing their production. To this end, the Korean government is building more agricultural engineering complexes, and is supporting the processing of agricultural and fisheries products, as well as the production of special products in farming or fishing communities. However, there are a number of serious problems which make it very difficult for Korea to compete with other developed countries. These problems and possible solution are discussed below

The Food Industry in Korea

According to a government report, in 1990 there were 32,021 food processing companies in Korea. Of these, 9,546 (38%) were producing their own specialized products, using advanced facilities, while 36 had sales worth more than US$13.3 million annually. They are ranked among the 500 biggest Korean companies, which shows the signi-ficance of the food industry in the Korean economy. By analyzing the development of the food industry in Korea, I shall try to investigate its role in the economy. I shall also discuss its relationship with the agriculture, livestock, and fisheries which produce the raw materials for processing.

Between 1970 and 1989, the Korean GNP increased 50 times, while the value of products manufactured in Korea increased 66 times. The value of products made by the food industry, however, increased only 27 times during the same period, showing that the development of the food industry has been much slower than that of other manufacturing.

Current Structure of the Food Processing Industry

The scale of manufacturing can be estimated according to the number of employees. Small companies with 5-49 workers comprise about 84% of the total manufacturing companies in Korea. However, they employ only 25% of the total work force and produce only 15% of total manufactured products. In the food industry, the situation is almost the same. Small companies comprise 84% of the total, employing 28% of workers and producing 10% of the total output. Only 1.3% of companies are large ones with more than 500 workers. However, these large companies employ 27% of total workers and produce 40% of the total processed foods.

The food industry in Korea has contributed greatly to increasing national income and creating more job opportunities. However, it is now facing many problems, such as poor facilities, lack of funding and competition from products made in Japan and China. These problems are described in detail in the following section.

Problems in the Korean Food Industry

The most important problem is that the scale of most food processing companies is too small. As a result, the productivity of most food processing companies is low, and the ability to compete with other countries is poor. The gap between large and small companies means that there is little competition between them, and there is always the possibility of monopolization for some items. Small companies are in danger of going bankrupt.

Secondly, both the labor productivity of workers engaged in the food industry, and the level of agricultural products processed, are much lower in Korea than in other countries. Korean labor productivity is only 65% that of Japan, and 35% that of the United States. Only 36% of agricultural products in Korea are processed, less than half the level of Japan and the United States. It is at a similar level to that found in the Philippines, Thailand and Sri Lanka, which are regarded as less industrialized countries ( Table 1(1187)). It is important for the Korean Government to increase the labor productivity and processing rate to the levels found in industrialized countries like Japan.

Thirdly, the Korean food industry faces difficulties in opening up overseas markets. This is because of many internal problems including the small scale of operations, the lack of investment, the high price of domestic raw materials, instability in the supply of materials, and the complex procedures required for international trade. There are also external difficulties, such as Korea's low competitive power compared with developed countries, and a lack of information about overseas markets. In addition, the pressure to open Korea's domestic market to imported agricultural products and processed foods exerts a negative influence on both food processing and agriculture in Korea.

The Future of the Korean Food Industry

A major problem in Koran agriculture is the seasonal overproduction of many products, leading to wide fluctuations in the price. Processing of these products, especially highly perishable ones, is the best way of solving the problem.

However in general, the future of food processing looks fairly bright. It seems likely that the processes of urbanization and industrialization will continue to develop. Levels of employment will increase, and it will be easier for housewives to get paid jobs, so that they will spend less time in the home. Such changes in life style are accompanied by changes in patterns of food consumption: people have more need for fast food that can save them time and labor. There has been a steady increase in the amount spent on food by urban families since the 1970's. The increase in the amount spent on processed food is much higher than the increase in overall food expenses, and the domestic demand for processed food is continually increasing.

Over the past 20 years, the increase in the amount of processed food imported into Korea has been much greater than the increase in exports. Furthermore, the deficit in the balance of trade in processed foods has been steadily increasing since 1970.

The Level of Korean Technology

The world is undergoing rapid changes in mass media and transportation, which in turn will change the world-wide marketing structure. Developments in information technology are making it possible to store and process vast quantities of data. This facilitates the movement of materials, and the competitiveness of commodities on the international market is becoming more important. To be more competitive, Korea has been trying to develop and renovate its technology. However, most of the effort put into developing agricultural technology has focused on increasing agricultural production. As a result, the level of post-harvest technology, including food storage and processing, is below the average level found worldwide ( Table 2(1118)).

Food Processing in Rural Communities

The food processing industry in rural communities shows quite a different structure from that of urban areas. Urban food processing companies were established for the purpose of making a profit. Rural companies, however, were founded according to a government policy of increasing the income of farm households. They include a large number of food processing companies in Korea, some of which are found in agrarian and fishing villages, while some are part of the Saemaeul Undong* movement. Many of them are processing traditional Korean foods.

By 1990, there were about 470 food processing companies in Korea which were supported by the Government. Most of them was run by farmers, fishermen, or their associations.

Future Directions for Rural Food Processing

Food processing industries can be divided into two types, according to their location. One type is urban, located in the area consuming its processed products, while the other is rural, located in the area producing the raw materials to be processed. Rural food industries have the advantage of being able to get raw materials directly from the producer at a relatively low price. It also provides job opportunities to farmers or fishermen living in the area, and facilitates the sale of their primary products. It may even give them the chance of participating themselves in the running of the food processing company. All of this can help to give them a higher income.

This type of food processing industry can succeed when farmers or their associations take part in processing and marketing, as well as the production of the raw materials. Fig. 1(1067) shows that primary products can reach the consumer in three different ways. Firstly, they can be distributed unprocessed through the existing marketing network. Secondly, producers can organize their own marketing system through which they distribute their products. Thirdly, the products can be distributed after being processed in the production area by the growers, through either the first network or the second one. I want to emphasize here the development of the second or third system, especially the third one, which can make a lot of value-added profit for farmers or fishermen.

Future Outlook

Rural food processing enables farm households to participate in the processing of their food products and earn value-added profits, giving higher incomes. To promote this, we should develop special regional products, and make them the best in the world. We also have to use the cooperative system for buying materials and selling the finished products. Food processing companies, especially those in rural areas supported by the government, still face many problems such as lack of funding and experience in management, and difficulties in securing raw materials as well as in selling the products. Those problems discourage the formation of food processing industries in rural areas.

Adoption of Post-Harvest Technology

As mentioned above, materials to be processed by rural food industries are usually mass produced. Most of these materials are perishable and seasonal products such as fruit, vegetables and other high-value crops. Therefore, it is very difficult to obtain a sufficient amount for processing. Technological development in fruit producing regions, in particular, has focused on increased production at the expense of processing and storage technology. As a result, farmers suffer from falling prices.

In order to prepare for the free market in agricultural products in the 21st century, Korea should concentrate on specialized crop production, as well as developing new high-value crops, and mechanizing production. Above all, Korea should make a great effort to modernize and rationalize post-harvest technology, to induce regional development and increase value-added profit. About 10-20% of total agricultural production is discarded after harvest in Korea, because of spoilage during transportation, storage, processing, packing or distribution. Therefore, more efficient use of produce is one of the most important ways of developing agriculture in Korea. Research into post-harvest technology should cover all possible problems that can occur, from production to consumption of agricultural and horticultural products.

The production of horticultural products, in particular, was originally designed for consumption by the farm family or nearby towns, because of its short circulation period. In this situation, there was little demand for post-harvest technology, because production and consumption were directly connected to each other. As modernization proceeded rapidly, and the demand for high-quality food increased, mass production has been widely adopted, and agricultural produce has now become a world-wide trade item. Large-scale production of fruit and vegetables, coupled with a weakness in both the technologies and facilities for storage or processing, mean that the whole crop is shipped and marketed within a short period of time, with a consequent fall in prices.

It is suggested that improved post-harvest technology should be applied to agricultural products. Between 1989 and 1991, Kyungpook National University made an advance in maintaining the quality of stored fruit and vegetables over a longer period by carrying out a project supported by FAO/TCP. Controlled atmosphere (CA) storage technology was developed, and this CA storage facility is now being used to train farmers as well as public service personnel involved in food distribution.

RESEARCH IN FOOD
PROCESSING TECHNOLOGY

The low level of technology used for the storage, packaging and processing of food, as well as a poor cold-chain system in the Korean food industry, causes deterioration of produce. This low level of technology is because food processing companies in Korea have only been in business for a comparatively short time, and have neglected investment into research. The level of investment into research by food companies in Korea is only 0.0 to 0.4% of total production value, while that spent on advertising is 0.2 to 8.0%.

Training and Education of Workers Engaged in Rural Food Processing

Workers engaged in rural food processing have little skill in standardizing processed food, in terms of its taste and appearance. They need to learn much more complex and specialized skills than just how to process foods. One urgent problem is to establish an organization to take charge of training and education of these workers. We have begun this kind of education program at the Korea Food Research Institute, but it is very difficult for a single institute to train all workers, because their specialties are so different. Besides, rural food processing companies are located all over Korea. I suggest that a training system for workers might be organized by the agricultural colleges at Korea's National Universities, and that this would give needed impetus to the development of rural food processing companies.

References

  • Beck J.H. 1990. Promoting Strategies for Processing Industry of Agricultural Products. Korea Rural Economic Institute.
  • Kang, S.K. et al. 1991. A Study on the Strategies of Rural Food Processing Industry Development. Korea Food Research Institute.
  • Kim, S.G. 1993. The existing status of food industry in Korea and its outlook of development, Jour. Regional Development, Kyungpook National University 1:103-115.
  • Kwon, T.W. 1990. Present status and future development of the food processing industry in Korea. Paper presented at the 1990 Symposium in Agriculture and Technology, Korean Association of Agriculture and Technology, pp 51-57.
  • Ministry of Health and Social Affairs. 1991. Year Book of Health and Social Status.
  • Sohn, T.H. et al. 1992. Controlled atmosphere storage of fruits and vegetables. FAO/TCP/ROK/8952 Project, Final Report. (Unpub. mimeo).

Index of Images

Figure 1 Proposed Distribution System of Primary Products from Farmers/Fishermen to Consumers.

 Figure 1 Proposed Distribution System of Primary Products from Farmers/Fishermen to Consumers.

Source:KoreaFoodResearchInstitute1991
  • *SaemaeulUndong-(lit.`NewVillage').Governmentprogramforimprovedvillagelife,includingconstructionofnewhousingetc.(Ed.)
  • *Sources:UnitedNation1981,IMF1981,OECD1982

    Table 1 Comparison of Annual Labor Productivity of Workers in the Food Industry in Korea and Level of Processing of Agricultural Products, Compared to Other Countries  

    Table 1 Comparison of Annual Labor Productivity of Workers in the Food Industry in Korea and Level of Processing of Agricultural Products, Compared to Other Countries

    *Source:TheMinistryofScienceandTechnologyofKorea,"ResearchontheStrategiesfortheDevelopmentofAgriculturalTechnologytoCopewiththeUruguayRoundAgreement",1991.

    Table 2 The Levels of Agricultural Science and Technology Found in Korea Compared with Worldwide Standards

     Table 2 The Levels of Agricultural Science and Technology Found in Korea Compared with Worldwide Standards

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