Produce distribution restructured, now with lower cart prices

the real reason for rising produce prices

if you've been to the grocery store lately, you've probably been surprised by the prices of vegetables and fruits. It's not uncommon to see a radish costing 5,000 won or a bag of apples costing more than 10,000 won. The government has finally come up with a fundamental solution to these skyrocketing prices.

the government finally came up with a fundamental solution. in fact, the reason why agricultural products are so expensive is not just a lack of production, but a complex distribution structure and high distribution costs that drive up prices.

the reality of distribution costs

the problem with the five-step distribution process

produce has to go through five stages to get to your table: production, transportation, storage, wholesale, and retail. Each stage has fees and costs that drive up the price.

currently, distribution costs account for a whopping 49.2% of the price of produce. this means that if you buy $10,000 worth of produce, $5,000 of it goes to distribution costs. For vegetables like radishes, onions, and sweet potatoes, the cost of distribution can be over 70%.

both producers and consumers lose

this creates a vicious cycle where farmers don't get paid and consumers pay more. the more intermediate stages of distribution, the more difficult it is to stabilize agricultural prices.

new government measures to improve distribution

revitalizing online wholesale markets

the government's key measure is to expand online wholesale markets. by significantly improving the current online auction system for agricultural products, the government has set a goal of moving 50% of all wholesale markets online by 2030.

the biggest advantage of online auctions is that they can dramatically reduce the number of distribution steps. farmers can ship directly to consumers or retailers, significantly reducing intermediate distribution costs. We will also ease regulations that currently restrict participation to businesses with annual sales of more than KRW 2 billion, making it easier for smaller farmers to participate.

introducing smart farm distribution centers

smart agricultural product distribution centers will also be established to solve the problem of quality verification, which is a drawback of online transactions. This system will utilize AI technology to analyze production information and distribution data, and track logistics in real time. This will improve distribution efficiency while ensuring the freshness and quality of produce.

reducing fees for wholesale corporations

currently, wholesalers are charged 7% of the winning auction price, which has been a heavy burden on farmers. The government is promoting a plan to mandatorily lower the fee the following year if the operating profit margin of a wholesaler exceeds a certain level.

there will also be stronger sanctions for wholesale organizations that engage in unfair trade practices such as collusion or accounting irregularities, allowing local governments to directly expel them.

implementing a shipment price protection system

a shipment price protection system will also be introduced to protect farmers when agricultural prices plummet. this is expected to help maintain a steady supply of agricultural products while ensuring a stable income for farmers.

how online wholesale markets will change the game

online wholesale markets are expected to revolutionize the distribution of agricultural products. for starters, it will increase the transparency of transactions. price fixing and unfair trade will be eliminated as all transactions will be publicly available online.

it will also make it easier for small farmers to participate in the market. farmers who previously had difficulty selling to wholesale markets due to low volumes will be able to sell directly online, which is expected to increase farmers' incomes and stabilize agricultural prices.

benefits for consumers

agricultural price information app launched

the government will launch a mobile app for consumers that will provide information on seasonal produce, prices at nearby stores, and tips on how to save money. this will enable consumers to buy cheaper and fresher produce.

expanding local farmers' markets

the number of local farmers' markets will increase to 90 by 2030. local farmers' markets sell locally grown produce directly to consumers, cutting out the middleman. with little or no distribution costs, they offer lower prices and greater freshness.

run an urban-rural farmers market

urban farmers markets are also organized where cities provide the space and rural areas provide the produce. this kills two birds with one stone, providing farmers with an outlet and urbanites with an opportunity to buy fresh produce at a low price.

frequently asked questions

Q1. How do I check the quality of the produce in the online wholesale market?

A. Our smart farmer distribution centers use AI technology to verify quality and provide detailed product information and photos. we also have enhanced return and exchange policies for greater consumer protection.

Q2. How much will produce prices actually go down?

A. We expect the distribution cost to be reduced to 30% from the current 49.2%. this could translate into a reduction of around 15-20% in consumer prices.

Q3. How can small farmers participate in online wholesale markets?

A. The government will significantly relax the annual sales threshold and provide training programs for online sales. we will improve the system so that anyone with a smartphone can easily participate.

Q4. What will happen to existing wholesale markets?

A. Existing wholesale markets will continue to operate, but they will be transformed into a hybrid online and offline market. offline markets will also be digitized to increase efficiency.

Q5. When will we start to see these changes?

A. The expansion of online wholesale markets will be phased, with pilots starting in 2025 in select regions. the full impact is expected to be felt from 2026.

final thoughts

improving the distribution structure of agricultural products is about more than just lowering prices. it is the first step in creating a sustainable agricultural ecosystem where both farmers and consumers are satisfied. if the government's initiative is successful, we'll all have lighter shopping carts.

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