Rice Prices Fall in Remote N. Korean Provinces

That’s good news, because those are the areas the government generally disfavors in its food distribution planning.

According to a source in North Korea, rice prices in Pyongyang, Pyonsung, Nampo, Sin-ui-ju, Hyesan, and Chunjin fell sharply in mid-January.

The rice price in Pyongyang at the end of January was 1700~1800 Won per 1 kg (the price used to be 2000-2100 Won), the price in Pyonsung and Sincheon was 1700won (the price used to be 2100 Won), and the price in Sin-ui-ju was 1660 Won (the price used to be 2000 Won). Additionally, the rice price in Hyesan at the end of January was 1800 Won (the price used to be 2000~2500won at the end of November), and the price in Chungjin was 1800~1900 Won (the price used to be 2000~2500won in the beginning of January). On average, prices dropped by 300~400 Won in mid-January.

However, this number only takes into account the nominal price. Considered along with the 10-20% rise of exchange rate between North Korean Won and Yuan, the plummet in North Korean rice price is even more drastic than it seems. [Open Radio for N. Korea]

Open radio reports that the price drop is related to a relatively good harvest going on sale for the first time, increased food imports, and rumors of more American food aid. Because the military’s warehouses are reportedly full, the people may be less worried that the regime will confiscate the food that might otherwise feed them. Apparently, the regime became worried enough about food supplies for the military to convert some of its hard currency earnings to something other than Hennessey:

At the end of December 2008, the North Korean government issued internal instructions to convert foreign currency, earned with foreign exports, to food stocks.

For instance, in Shin-ui-ju, coal is generally exported to China at about $65 per ton, but the money earned through this transaction is converted to rice, and brought back to North Korea. An export of about 7.5 tons of coal can bring in 1 ton of rice.

The first shipment of about 500 tons of Chinese rice acquired in this way arrived at the Port of Shin-ui-ju around January 8-9 of this year. Currently, exports are continually being converted into rice. After hearing this news, the townspeople of Shin-ui-ju hoped that rice prices might decline.

The companies involved in conversion transactions are generally subsidiaries of the Coal Industry Department. Military-related entities, such as the Ministry of the People’s Armed Forces (The 54th Department of Intensive Tradig Company), the Second Economic Commission (Ryong Ak San Trading Company), the Border Guards (Eun Pa San Trading Company), as well as special entities under the Central Party (the 88th Reung Ra Company) are all organizations that convert exports into rice using this method.

This rice is stocked up as emergency stockpiles, and not sold on the market to sell for the citizens. It seems that these activities aim to increase military food stocks in preparation for heightened tension between the North and the South. [Open Radio for N. Korea]

The lesson here is that the North Korean regime is much more capable of managing the internal food supply than many of us earthlings give it credit for. The dire predictions that North Koreans would starve without South Korean aid and fertilizer have been refuted, and whatever American food aid actually arrived was of modest quantity. Yet there’s little question that a large part of the 2007 harvest was destroyed by flooding. What made the difference? Chinese aid may be part of the answer, but another part appears to be a shift in priorities. Open dissent began breaking out, soldiers were going hungry, military morale suffered, and soldiers descended like locusts on the farms near their garrisons. The regime was troubled enough by these unsustainable trends to shift some of its cash toward the purchase of food.

It’s also reasonable to believe that remittances from North Korean exiles in the South have drawn in more food imports. Food price fluctuations in North Korea have been driven, in large part, by rumors in the last year. Last spring, rice prices skyrocketed over fears of a renewed famine. Although some areas appear to have suffered hunger-related deaths, the toll was probably small by North Korean standards.

Open Radio also provides this excellent graph, and its own analysis of what drives food prices. One thing I quickly noted is that even with the fall in prices, prices are still much higher than they were two years ago. It may be that that’s the result of “natural” inflation as the command economy distinegrates and people learn to survive sources other than state rations, but Open Radio alleges that price fluctuations are more the result of the regime’s attempts to control the market than anything else:

Since 2005, there have been 4 occasions of sudden rise in the North Korean rice price (See Graph 1). These four incidents are directly connected to the North Korean market control policy. The sharp rise in rice price in October 2005 was influenced by the government’s announcement of its plan to return to the old food ration system. In May 2006, the government took control of the market under the pretext of rice planting and drove the rice price higher. In August 2007, when several campaigns to control the market were taking place under the banner of “Defeat of Unsocialism”, the rice price dramatically increased. Lastly, in April 2008, the rice price unprecedented jumped to 4,000 Won for 1kg of rice. During this period, policies that limit the age of women dealers in the market place were implemented.

However, absent government market control, North Korean rice price have remained steady regardless of the international sactions. For example, from July to October 2006 when North Korean nuclear experiment and missile launch took place, food price was kept stable even after the United Nations sanction. [Open Radio for N. Korea]

Recent reports suggest that the regime’s efforts to stamp out private markets have been a failure.

Open Radio for North Korea broadcasts “unofficial” news into the North. The founder of Open Radio is an interesting, charismatic, and enigmatic figure who adopted the name Young Howard, and whom I’ve met and spoken with on several occasions. Much like Kyonggi Province Governor Kim Moon-Soo (pt. 1, pt. 2), Young is a former leftist who (tells me he) was jailed by the previous right-wing South Korean dictatorship. Open Radio only started its English language online reporting recently, so I can’t speak much for their cred yet. On the other hand, if this prediction comes true, that cred will take a great leap forward.

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