Rice prices in North Korea remain stable despite sanctions

Pyongyang’s Tongil Market. Image: Daily NK

The Korea Institute for National Unification (KINU) estimated in 2016 that there are 404 general markets in North Korea. Johns Hopkins University’s US-Korea Institute determined in 2017 that there are 468 in existence. These estimates suggest that the number of general markets will soon exceed 500.

North Korean residents depend on the markets for food supplies. Government rations are only distributed to public servants, teachers, soldiers, and workers affiliated with military factories or factories producing special items. Even these privileged groups face difficulties surviving solely on rations and generally have to buy food from the markets to supplement their nutritional intake.

Until mid-January, the price of rice in North Korea’s markets hovered around 5,000 KPW per kilo. Rice prices have risen more slowly in comparison to other commodities. The increase in rice production over the past few years and the import of cheap rice from China has led to relatively stable prices, even as North Korea remains under international sanctions.

Rice imported from China plays an important role in balancing supply and demand in North Korea and determining overall food prices. The rice produced locally in North Korea this year appears to be of good quality and is thus relatively expensive.

Rice imports flowing in from China reach the markets via wholesalers and traders, and the currency exchange rates together with the balance of supply and demand determine the eventual price for the consumer. Overall, these factors have led to a fall in rice prices in North Korea.

Locally-grown rice in North Korea is distributed after collective farms and private farmers sell their crops to rice wholesalers. Private farmers growing their own on small farm plots contribute to the supply, and some is also siphoned off from government organizations and the military, generally flowing into the markets.

North Korea’s collective farms often borrow money from grain traders at the beginning of the farming season so that they can purchase farm supplies. These debts are normally repaid after the end of the harvest season. The loans are for items including gasoline, diesel, vinyl film and manual agricultural sprayers (for pest control) and are repaid with grain or by cash obtained from the sale of harvested crops in the markets.

Larger collective farms naturally require more supplies, which means that more crops need to be sold in the markets [to pay off debts]. Farms cannot avoid this cycle; without such supplies their production would fall and the volume that the government purchases would decline as well.

“No matter how zealously you farm without vinyl film, manure and other necessary farm supplies, you can’t succeed,” one defector told Daily NK. “Without produce to sell to the market, there’s no harvest yields, so it’s common to go into debt to obtain supplies. Most collective farms are doing this.”

Kim Jong Un’s emphasis on securing agricultural supplies in his New Year’s Address does not appear to have resulted in actual measures to increase the amount of crops the government purchases.

“The collective farms generally sell rice, corn and other staples, while private farmers sell various types of grains like sorghum,” said a source in Ryanggang Province. “North Korean grains sell at higher prices than Chinese grains. Rice imported from China does not taste as good and tends to contain dust.”

Chinese grains are imported by trading companies through customs offices and distributed throughout the country. Imported rice reaches wholesale distributors through designated channels in each region, with some provided to state-run orphanages, nursing homes, and schools. A proportion is also allocated to shock worker teams at major construction sites

Trading companies purchase rice by the ton in China and send the shipments off to stores. Rice sellers in cities straddling the Sino-North Korean border generally store 10 tons of rice or more. Merchants in the markets will normally purchase the rice from designated warehouses every four days, with around 3-5 such warehouses in each city supplying imported rice.

In grain-growing regions like North/South Hwanghae and North/South Pyongan provinces, distributors will ensure that rice is shipped to Ryanggang and Kangwon provinces.

Grain shipments that find their way into North Korea’s domestic markets through these routes are ultimately sold to ordinary people at prices set by the individual merchants themselves. There are few regional differences in rice prices these days because traders are able to check and adjust currency rates and rice prices using their mobile phones.

The multi-tier rice distribution structure that runs from the producer, distributor (including trading companies), wholesalers and rice merchants operate with relative efficiency, which has allowed North Korea to stave off further deterioration of its food supplies despite poor crop yields last year.