South Korea is one of the California Rice Industry's most valuable export markets. It consumes more than 100,000 metric tons of our medium grain Calrose rice each year. This market, like its Northeast Asian neighbors Japan and Taiwan, is a World Trade Organization (WTO) mandated market.
That means that South Korea has a negotiated Minimum Market Access agreement to import rice from the US, China, Thailand, Australia, and other countries that is administered by the government purchasing agency in South Korea -- aT. The newest structure of this agreement was negotiated in 2004. At the beginning, nearly all of the imports were brown rice used for processing and made into alcohol, noodles, confectionary items, etc. A small portion of rice was imported each year as milled, packaged rice for table use. This has been distributed by aT directly into the market, giving the USA Rice Federation an opportunity to promote Calrose rice directly to Korean consumers through its International Promotions Program.
More to come on the success of this!
Recently, a group of industry leaders (The Asia Technical Working Group Chaired by fellow California Rice industry member Alex Balafoutis of PGPI) traveled to Seoul for the Technical Meeting between aT and U.S. This meeting is held annually, alternating meeting locations each year between Seoul and Sacramento. The meeting is a venue used to discuss all technical aspects of the WTO mandated rice trade between the two countries.
This year the meeting started out with presentations from both sides about the status of the rice industries in our respective countries. Production estimates, stocks reports, supply and demand reports, export and import statistics were all shared. Additionally, the two sides discussed ways the trade can become more efficient and economical in the future – which would benefit both sides. Topics included standardizing rice grading techniques and methodologies between point of loading and at destination; standardizing pallet configurations and bag types; and continuing to provide advance notice of the annual tender schedule. Despite some minor points of contention in the meeting, overall both sides were pleased with the outcome and agreed it was definitely a success. Both sides also left the meeting feeling that even on points where total agreement was not achieved, strong building blocks for future discussion have been laid.
Over the past couple of years, the trend of importing brown rice for processing has transformed dramatically. So far this year all but 11,000 metric tons of the United State's country specific quota (CSQ) was imported as package quality milled rice for table use. This is a 180-degree turn around from 2004. aT makes its purchasing decisions based on consumer demand. What this flip in their tendering from brown rice to package quality rice means is that Korean consumers are asking for Calrose rice. In turn, aT has changed its purchasing practices.The day after the Technical Meeting, I was afforded the opportunity to experience this first hand. I visited aT'sPwentang Warehouse outside of Seoul. This is one of their major distribution centers for all imported products -- including Calrose rice. It was quite impressive. There is 20,000 square meters (more than 66,000 square feet) of storage. By Korean law, it all has to be temperature and humidity controlled. During our tour, Mr. Kim (the warehouse director) told us that the Calrose rice was selling out into the general market almost as fast as it was being delivered. He said that Korean people enjoy U.S. Calrose, and that his family eats it at home. He said the ability to order the product on line from "E-tailors" has made its popularity rise rapidly. This marketing effort through E-tailors has been heavily promoted and supported by the USA Rice Federation. This picture is in one of the 27 refrigerated bays at the facility. That's all Calrose rice behind us.
After our visit to aT's warehouse and distribution center, we stopped by the Seoul Grain Wholesalers Market. As its name suggests, this is like a Sam's Club that carries only grain. The Wholesalers Market services all customers from individuals wanting to buy one or two bags of a product, to small distributors looking to purchase two or three metric tons. We met with Mr. Hwang the General Manager of the rice section. He told us that despite a steadily increasing price, Calrose rice is their best seller. Even though it is priced 50 percent higher than Chinese rice and almost equal to local, Korean rice -- he said that more and more consumers are purchasing Calrose. The reason, Mr. Hwang is convinced, is the quality. He said Chinese rice is lower in quality and consumers have concerns about food safety. Compared to local rice, he said that the quality of Calrose is much more consistent. So, the consumers knows what they are getting every time. Quite frankly, I was very shocked and pleased by all of the positive comments made by Mr. Hwang. These pallets here have 1.8 metric tons (almost 4,000 pounds) each of rice on them. He said he sells at least two pallets every day.
The rising popularity in South Korea of Calrose rice as a origin recognized, table rice was a great surprise to me. Unlike in our largest milled rice market (Japan), the Korean consumer has been exposed to, and seen the positive characteristics of, California Calrose rice. The response has been nothing short of fantastic. In Asia, changing attitudes about rice consumption is a long and arduous process. The success in Korea is a tribute to our California producers and millers who are supplying a high quality, consistent product, and to our strong marketing and promotions staff on the ground in Seoul. I believe that South Korea will continue to grow in its importance to a strong and viable California Rice Industry in the years to come.
Chris CrutchfieldPresident and CEO -- American Commodity Company
Chris Crutchfield is very proud to represent the third generation of his family to be involved in the rice industry. Currently Chris is involved in all aspects of California rice from production all the way to the grocery store shelf.
Shortly after graduating from the University of Missouri in 1996, Chris moved back to California and joined with his father Paul Crutchfield in the formation of a rough rice pool for direct marketing to Turkey. Chris was responsible for the day-to-day management of the pool. That partnership developed into the formation of American Commodity Company (ACC) in 2000, and Chris assumed all direct management responsibilities for ACC.
Prior to establishing himself in the California rice industry, Chris worked in the press offices of Governor Pete Wilson as his Assistant Press Secretary. He also briefly taught secondary education in the California public school system.
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