Should South Korea rethink its 30-year agricultural corporation policy?

Agricultural corporations introduced to promote collaborative and corporate-style farm management have in practice operated largely as family-farm-based entities, a new report has found. Researchers say the policy framework underpinning the regime for more than 30 years needs to be redesigned to reflect conditions on the ground.

According to a report released Saturday by the Korea Rural Economic Institute, agricultural corporations were originally conceived as a vehicle for expanding crop production scale, but have instead grown primarily by generating added value through retail and processing rather than production. With individual farmers already having achieved considerable scale on their own, the institute said the role and function of agricultural corporations within the broader farm-scale expansion policy warrants reexamination.

The number of agricultural corporations more than doubled, from 3,261 in 2015 to 7,174 in 2024. Entities registered in the agricultural management database rose over the same period from 7,228 to 17,956. Yet the corporations' share of total cultivated land grew only modestly, from 1.09 percent to 1.92 percent. Cultivated area expanded from 18,207 hectares to 27,907 hectares, but the corporations' share of all farmland still fell short of 2 percent.

On that basis, the report concluded that agricultural corporations play a limited production role while their involvement in distribution and processing has expanded. Despite the sharp rise in their numbers, the corporations cannot be said to have driven farm-scale consolidation, the report said.

Scale expansion among individual farmers has also progressed considerably. Agricultural corporations accounted for only 11 percent of the area farmed by large-scale operators — those cultivating 10 hectares or more. Among operations of 50 hectares or more, the corporate share was relatively higher, but researchers attributed that largely to specialized locations such as reclaimed land that corporations can more easily access. The research team concluded that agricultural corporations have not been a particular driver of farm-scale expansion.

How agricultural corporations operate has also diverged from the original intent of the system. The regime was designed for multiple farmers to pool production inputs and run collaborative, corporate-style operations, but family-farm-based entities have proven common in practice. Research also found that 70 to 80 percent of the farmland used by agricultural corporations is secured through leases rather than equity contributions or outright purchases. Owning farmland in a corporation's name can create complications — disputes among members over interests, difficulties securing full-time staff, and eligibility issues for direct payment subsidies — which limits the scope for expanding ownership.

"To strengthen the competitiveness of agricultural corporations, policy should shift its focus from expanding land ownership toward activating the long-term lease market," the research team said. They also identified as priorities easing the disincentives to leasing created by direct payment and tax rules, and reforming the system to encourage farmland consolidation and long-term leasing.

The researchers added that inheritance and gift regimes, as well as the criteria for farmer eligibility, also need to be updated to reflect current realities in order to support the long-term succession and scale expansion of agricultural corporations.