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1. Introduction The General Problems of the Middlemen in the Marketing process of the Agricultural Products in Korea The purpose of this study is to analyze and clarify the status and function of the middlemen in the marketing process of the main agricultural products in Korea. In general, the marketing process of the agricultural products in Korea is to greatly inefficient state for reasons that the marketing subjects are usually of too small sized scale and unorganized, and still have so much pre-modern characteristics, and their marketing functions are still in unspecialized state; also there are many defects in institution and policies for the promotion of marketing and fair dealings. In addition, such external factors as the poor facilities of communication and transportation, lacks of financial support system and the unskilled technique of physical distribution, etc. are also to be counted as the important causes of inefficient marketing. All of these causes of inefficient marketing not only interrupt the reasonable distribution of agricultural products but also act disadvantageously upon the farmer's income, price stabilization and the abundant consumption of agricultural products. Also these causes and defects form the basis of the pre-modern action and behavior of the middlemen, which makes their problem more complicated. Here in this preliminary chapter we try to observe some significant phenomena which always come into question in relation to the problem of middlemen in the marketing process of agricultural products. A typical organization in the marketing process of agricultural products in Korea is that of merchants. But in general the various kinds of middlemen in the markets of both production and consumption places are mostly small merchants whose functions are not specialized but rather so complicated that they are not yet organized or systematized according to their functions. So the various functions of selling and buying, physical distribution, sales promotion and so forth performed by these merchant organizations are usually carried out in the pre-modern way. For instance the middlemen in the market of production places are used to do unfair dealings on quantity or price of commodities by taking advantage of the ignorance of agricultural producers on market information or professional knowledge of dealings. Of course we can see the same state of affairs between the middlemen and consumers in the market of consumption places. And, worse still, the organizations of the middlemen in the process of physical distribution such as packing, transportation and processing are also extremely so defective that almost no one makes effects to improve the quality of commodities or the technique of preventing losses and wastes in the process of transportation or storage. These circumstances give unfavorable effects on the consumption promotion, wide distribution and the adjustment of seasonal supply of agricultural products. Particularly, in case of fruits or manufactured products of livestock which are perishable, we can see these circumstances more obviously. Moreover, though the central wholesale market or many other public markets have paid more attention to making physical facilities or places for the promotion of dealings, in reality it is the general state of affairs that most of these facilities are inefficient and inadequate, and many of them are getting worse and worn-out. Particularly, in case of the central wholesale market of grains, it has not been yet institutionalized to organize the speculative merchants besides above defects. Therefore there thrive the unfair and speculative actions through buying-up, unwillingness to sell and price manipulation, etc., which are usually carried out by the middlemen such as brokers, wholesalers or consignment salers. As a result, the equilibrium of the supply and demand of grains in Korea can not be realized in wholesale processes and therefore the prices of grains are always at the mercy of seasonal fluctuations. Next in the viewpoint of marketing functions, the various functions such as standardization, financing, risk charging and market information, etc. in the marketing process of agricultural products have not been yet normalized in the direction of estabishing the marketing order to the advantage of both the producers and consumers. And thus these functions are doing their distorted functions to make the middlemen or the usury profitable. In the first place, considering the problem of the standardization or regularization of agricultural products, not only the fairness and rapidity of dealings, but also the incentives for farming and selling by the differentiated prices are much obstructed, for, on actual activities of dealings, the dealing units and grades of agricultural products are lacking in their unities or standardizations. Secondly, as for the problem of financial function in marketing process, it is indispensable for the promotion of marketing to supply money to the merchants. Nevertheless, in Korea the money supply to the merchants is in great shortage, because the industrial manufacturers have a priority to get loans from the banks. Therefore, most of the merchants, who are petty and poor in their capital power, run into the personal usury debts. These usury debts of the middlemen in their business activities not only encourage their speculative activities or unfair competition and dealings, but only encourage their speculative activities or unfair competition and dealings, but also transfer the increment of marketing cost by the higher interest to the burden of producers and consumers. On the other hand, the money supply to the agricultural producers is also so insufficient that the big merchants very often do the function of money supply in place of financial organizations such as banks or agricultural cooperatives and make the agricultural producers often sell their products before a harvest. Thirdly, as for the function of risk charging, the merchants of Korea are doing their business under the speculative factors, especially under the price risk. Furthermore, even in big wholesale markets these speculative merchants are not institutionalized to act openly, so that they get loss very often from the price fluctuation and shift this loss to the burden of producers or consumers who are ignorant of the market information or prices. Finally some words must be said about the function of market information which is one of the most important factors to promote and normalize the dealings. As the producers and the middlemen in Korea have not yet the functions to collect and treat their own specialized informations, all the necessary informations can't be transmited to them rapidly. These market informations must be transmited rapidly and exactly to all the people concerned such as producers, every kind of merchants, transporters and consumers, etc. to be used by them at any time. Only by doing this the competition in dealings can be encouraged much more, and the monopolistic and speculative activities can be eliminated. However, there are not any adequate systems to transmit the market informations to those people. Therefore, their judgment of prices is always in uncertaintly and this causes not only the discrepancy of supply and demand, but also the speculation. In the above we have observed some basic problems which usually come into question in relation to the problem of the middlemen in the marketing process of agricultural products in Korea. In the following chapters we will survey and analyze the status and functions of the middlemen in the marketing processes of gains and fruits which are the most typical among all the marketing processes of agricultural products. However, this English summary is to present the mere essential part of our study which is written in Korean and completed in the perfect form. 2. The Status and Functions of the Middlemen in the Marketing Process of Garins Recently, as grain shortage has become serious, the middlemen are blamed for making excessive profits. The purpose of this chapter is to analyze the behavior and functions of the middlemen in the marketing process of grain, and to see whether the middlemen should be blamed for their behavior. And then one may ask if the grain shortage become more serious by the behavior of the middlemen. Lastly, one may also suggest how the present marketing system should be reformed. In recent years, Korea, has to import some hundred-thousands metricton's of grain annually, and it costs over one hundred million dollars. It is believed that the grain shortage is partly due to the increase of demand, but it is more fundamentally due to the stagnation in the productivity of grain. One can not see any upward trend in annual rice production during the decade of the 60's, although one can notice some fluctuations owing to the natural weather conditions. Many causes for the stagnation in rice productivity might be suggested, but one of the most important causes is the deterioration in the terms of trade of rice products. This unfavorable position of farmers in their transaction brought about the decrease in the relative money income, and in turn, it hampered the inducement of investment, delayed technological innovations, and again, let farmers depend only on the old primitive agricultual management. And yet, one must take note of the fact that in spite of the deterioration in the terms of trade of farmers, the wholesale price of grain at cities have risen faster than the wholesale prices of the other commodities. One may reasonably explain such contradiction as caused by the seasonal oscillation in grain prices. The grain prices usually mark a sharp fall during several months after the harvest, when it is still in the possession of farmers, but rise up sharply after the most of grain is handed over to the middlemen from farmers. Thus, the rise of grain price at cities pushes up the living cost of working forces, and it in turn pushes up production cost of manufacturing, the prices of manufactured commodities, and the farmer's purchasing prices. As a result of such a cost-push inflation, the terms of trade of farmers have been deteriorated. So long as the seasonal oscillations of grain prices are not controlled, we can not expect to improve the terms of trade of farmers, and thereby increase the supply of grain. On the other hand, however, there is one group of people who do not want the drastic fluctuation of grain prices to be moderated. This group is the middlemen in the grain transaction. Originally, the very function of middlemen was to make producers contact with consumers, to make the circulation of grain smooth, to adjust supply and demand of grain, and to set up the market price of grain. They earn margin in the process of circulation as a remuneration for performing these functions. However, they have never been satisfied with normal margins, and they have been used to pursue endless excessive profit whenever they catch an opportunity to do so, and dare to commit any kind vicious deed for their purpose. Since this is their behavioral pattern, they would not want the grain prices to be stabilized. Whenever the grain prices are fluctuating drastically, they can speculate on a price rise, and also may get some excessive commercial profit. It may be said that the grain prices, in Korea, have not been determined in accordance with the cost of production, but in accordance with the amount of marketable grain. While the seasonal fluctuations and price elasticity of demand is little, the supply of grain is very competitive owing to the disorganization of farmers and to the production of grain being carried out simply as the livelihood of farmers. Thus, the grain prices, in Korea. would be easily handled, if one may regulate the marketable quantity. Under such condition, Korean grain market is very easy for middlemen to make a speculation. Among the middlemen, some big consignees hold considerably great amount of commercial fund, with which they finance forward or backward to suit their marketing line, and there has been a kind of organized vertical line system, and in this system all kinds of middlemen cooperate closely each other. That is to say, the whole marketing lines from gathering to distribution, in which the big consignees take charge of the core of the group, have been composed in Korea. There are considerably many groups like this, and they, sometimes, may compete each other, but they do not always compete; they are, frequently, combined each other to pursue some common profit. When their efforts combined, the Korean grain markets are almost entirely handled by them. If the middlemen, whose desire is only to pursue excessive profit, holds the manipulating power of the marke, one would easily suppose what the result would be like. There should only be a drastic oscillation of the grain prices. It is evident that the effect of such a price manipulation done by middlemen might be furious in a bad harvest year. For example, the seasonal price oscillation in 1963 was about 131 per cent in that year. Towards the end of the 60's, however, when the grain shortage became serious, the Korean government could not help importing more grain, and interfered in grain market more actively. Owing to such a government policy, the drastic price oscillation of grain have been moderated to a certain degree, and the profiteering of the middlemen have also been diminished a little. But, as the quantity of grain sold by the government was not enough to sweep out the middlemen's market manipulation completely, there has occurred another type of profiteering by the middlemen. This new type of excessive profit made by middlemen have been brought by the fact that there is a certain gap between the selling price of government owned rice and the actual market price, so that the middlemen used to disguise the government owned rice as privately-owned rice, and sell at the market price which is considerably higher than the selling price of the government rice. It is a very strange phenomenon that the middlemen, not consumers, get a great excessive profit by selling the government-owned rice which are supplied to stabilize the market price of grain to relieve livelihood of consumers. One may say that such an ill-founded policy is due to the misunder-standing by the government officers about the behavior of the middlemen whose motive of dealing is only to make profit, and to their easy thinking that if the supply of government-owned grain is increased, the price should be easily get to the stabilization, so that the middlemen's marketing system may be sufficiently useful. One may point out that it is very foolish to depend on the middle's marketing system without a certain elaborate counter-measure to stabilize the grain price. Since the behavioral pattern of the middlemen, to begin with, tend to pursue endless profit, any they are used to doing immoral transactions, one should not depend on them, rather deprive them of their manipulation power of the market and should set up a new distribution system which is managed for the national interest, and not for profit motive. Finally, one may propose a reformed system of grain distribution as follow. (1) Divide the administrative work regarding grain into two parts: (a) planning and (b) operation, and establish a new government office (it may be called Grain Administrative Office) which will undertake the later business only. (2) The new office sets up its own distributing net works which will be supervised by itself, while the gathering organizations can still be the existing Agricultural Cooperative Association system to save the government expenses. (3) If the new office undertake only the partial control of grain and sell rice only at the time of shortage, as done at present, the business volume of the new office is too little to save the government expenses and it can not bring about efficient price stability. So that, it should be expected that the proposed new office might sell the government-owned rice all the year round at three major cities, Seoul, Pusan, and Taegu. (4) Since about ten million Suks of rice are necessary to meat this purpose, the government needs to charge forward to contract or allocate the amount with farmers in addition to the imported rice. (5) As an enormous fund is necessary to purchase such a vast quantity of rice, and there might be a dangerous to provoke an inflation when the enormous fund is poured into circulation in a short time, it would necessitate the government to purchase rice every day of the year. At the same time, the purchased rice should be sold at once in the above mentioned three big cities, and the returned fund will be used for the further purchasses. (6) To make the government purchase the equivalent amount in each month during the year, the government should adopt some method: (a) an advance delivery system―granting purchase funds to farmers before they hand over the rice to the government, (b) varying the government purchasing price according to the time of the purchase; that is, the later purchasing time is, the higher the price, so that the farmers would not concentrate in selling their grain at a certain time of the year, for example, soon after the harvest, and at the same time the middlemen would not be able to induce their immoral behaviors. (About 20 per cent differences in purchasing price might be enough.) (7) The price of rice sold by the government should be fixed throughout the year at a level in which the operating costs are added to the original purchasing price. If, however, the burden of government expenses becomes heavy because of the increased costs of the latter, the selling price might be set a little higher so that the burden of of the government expenses may be lightened. It has been the attempt of this paper to analyze the behaviors of the middlemen, and to point out that their behaviors contribute to the worsening of the Korean grain shortage, and then to propose an immproved system in the distribution of rice. Here, one should like to emphasize that if we want to make the grain shortage relieved, the government should take off the middlemen's power of manipulating grain market and take charge of the responsibility tos tabilize the market directly. At the beginning the operation should start in three big cities, and later extend the policy to the other cities along with the increasing of the government revenues. In the long run, it may be expected to carry out the Dual Grain Price System, which is the best way to induce the increase of farm products, and to exclude the violence of the middlemen and thereby one hopes to stabilize livelihood of citizens. 3. The Status and Functions of the Middlemen in the Marketing Process of Fruits 1) Foreword Fruits are one of the indispensable food for Koreans. As the income of people increases and the level of food life uprises, the demand of fruits also increases. And we see a steady growth of fruits production every year. Though the fruits industry has the promising ground as a growing industry, in reality many of unreasonable factors in the marketing process are disturbing the rapid growth of this fruits industry. Therefore in this chapter we have attempted to study the unreasonable factors which usually come out in relation to the behaviors and functions of the middlemen in the marketing process of fruits, and to present some better policies for the improvement or removal of there unreasonable factors. 2) The Structural Characteristics of the Fruits Marketing. Comparing with other agricultural products, fruits are very perishable ones. And their freshness is indispensable factor to the value of fruits as commodities. To keep their freshness, the system of speedy distribution must be established. Therefore, the distribution of fruits is usually carried out through the large wholesale market. But structurally the production and consumption of fruits are in small scale. So, it is difficult for an individual producer to transport the small quantity of his products directly to the consumer market. Such a situation gives the middlemen a chance to participate in the distribution process. On the other hand, consumers don't have dealings in the wholesale market because the quantify of their dealings is very limited. This, too, makes the middlemen come to intermediate between the wholesale market and consumers, and do their role to distribute the fruits to the consumers. In a word, the fruits arrive at the hands of consumers through the three steps, that is, collection, intermediation and dispersion. The large wholesale markets operate as a center of collection and dispersion. 3) The middlemen in the Marketing Process of the Production Place. Those who take part in the marketing process of the production places are mainly the producers, merchants and the agricultural cooperatives. Their status and functions can be summarized as follows. <The Producers> The farmers are not only the producers but also the sellers of fruits at the production place. So they are the persons concerned in the marketing process at the beginning. By a survey it was proved that the average size of the management per household is from 5 Banbo to 1 Cheongbo (200-300 acres), which are so small as the units of fruits production. More than 70% of fruits producers are in debt to the merchants. Agricultural machines are not used for their cultivation. And they are lacking in the storage facilities. This has an unfavorable effect on the marketing process at the production place. In fact, the capacity of the storage facilities in Kyung-pook district can store now the mere 30% of fruits which are necessary to be stored. Somentimes the producers sell their fruits in the consumers' market by themselves. But lack of money, knowledge on the market, and necessary expenses of storage, selecting, packing and transportation hinder them to sell their products at the consumers' market with the exception of the farmers whose fields are located nearer to the market. In case of Kyungsan county, 30% of all products are sold by the producers themselves. So it is quite natural that the merchants have come to do the important role in the marketing process at the production places. It should be, however, pointed out that the merchants control the producers in premodernistic way by taking advantage not only of their lack of money and knowedge on the market, but also of their traditional customs. This fact gives rise to a serious problem. <This Merchants at the Production Place> The merchants at the production place may be classified as the consignment merchant, the collection merchant or pedlar and the agricultural cooperatives at the production place. The amount of fruits sold by the consignment merchants in about 25% of all products but that of the agricultural cooperatives is only 5%. The consignment merchants at the production place have relatively sufficient money and various facilities, and they have dealings with the merchants of the large consumers' market who sometimes give the former financial helps. The commission of consignment sale is usually 2 or 3% of fruits prices. On the other hand, the collecting merchants come into the production place from many places in the harvest season and purchase fruits from the consignment merchants or directly from the producers. As they buy fruits in cash, the needy producers tend to sell their products to this kind of merchants. But recently these collecting merchants are handing over their places to the consignment merchants. The sales through the agricultural cooperatives also has been insignificant because of the strong linkage between the producers and the merchants at the production places and the insufficient money supply of agricultural cooperative. Finally it must be pointed out as an important fact that the producers sell their products before the harvest. The big merchants supply money fund to the needy fruits producers and get the right to purchase all of the products at extremely low price. This custom acts on the producers disadvantageously. 4) The Middlemen in the Marketing Process at the Consumption Place. Fruits reach the hands of consumers passing through the various hands such as the central wholesale market or the common sales market of the agricultural cooperative, the brokers, the appointed dealers, the wholesalers and the retailers. Here we are to study the status and functions of these middlemen in the marketing process of the consumption places. <The Large Wholesale Market> There is only one central wholesale market in one city where the city government is located. It does the function of collecting the fruits from the production places and that of selling at an open auction to the buyers. By brokers we mean the merchants who are qualified to participate in the auction at the central wholesale market. The brokers transfer the fruits to the wholesalers or to the retailers by getting some commission. The facilities and the services of the central wholesale market are so bad that it can not perform its original functions. Comparing with the quantity of the fruits that the big consignment merchants deal with, that of central wholesale market is very limited because of the lack of its close linkage with the producers or collecting merchants. In Seoul city, only about 20% of all fruits imported from the production places are transacted at the central wholesale market. Commission of services is 7%, but in case of apples it is 6%. The common sales market of agricultural cooperative does the functions of collecting the fruits from the affiliated cooperatives of production places or the collecting merchants and producers, and of selling them at auction to the wholesalers or retailers. This common sales market has the better and larger facilities than the other wholesalers, and it affords favorable price to both the producers and consumers. However it can not give financial support in advance to the producers sufficiently, comparing with the case of other merchant. In Seoul, about 20% of all fruits imported from production places are dealt with at the common sales market where the commission of transaction is 6%. Next, we are to mention on the other merchants at the consumption place who perform the similiar functions. Having long experience and career, they have strong linkage with the merchants at the production place. They lend them money without interest, and get the exclusive right to purchase the products. About 60% of all apples imported to Seoul are transated by the hands of these merchants. It takes usually 3 or 4 days to pay for the fruits, and the commission for their services is 7 or 8%, 1% of which is paid back to the sellers as a bounty. Some of the merchants pay even for the travelling expenses of these sellers who come from the production places. <The Wholesalers and Retailers> The wholesalers have their own stores in the wholesale market at a city. Most of them are the brokers working at the central fruits market, the appointed dealers of the common sales market of agricultural cooperative or the brokers working for the big consignment merchants. They sell their fruits to the retailers or the local merchants in the country by wholesale, or sometimes to the consumers by retail. The margin they get is about 10% when they sell to the retailers. But when they sell to the consumers they get 15% of margin. In this marketing margin, such expenses as carriage, packing, personal expenditure and the business tax are included. On the other hand, the retailers are those who perform the functions of the final process of marketing, where they always deal with the consumers, According to the form of sales shop they may be classified as a storeretailer, a stand retailer, a peddlar, a small shop retailer, the retailer in train and the saler in the department, etc. Usually they are small merchants, most of whom are grocers. They sell fruits to the consumers by retail. Their margin is usually about 20%. Now, the important problems involved in the marketing process at the consumption place are : firstly, the central wholesale market and the common sales market of Agricultural Cooperative do not have yet enough facilities to take possession of the business of other similar merchants; secondly, the employees of these public markets are the salaried men who act very passively as compared with other similar merchants; and thirdly, in the view point of ability the brokers who belong to the central whole sale market or the appointed dealers who belong to the common sales market are inferior to the wholesalers who have tight linkage with the above mentioned merchants who do the similar functions at these markets. Another important problem is the fluctuation of price through the year due to the lack of facilities for refrigeration to keep the freshness of fruits. This gives damages both to the producers and consumers. Finally, it is also a serious problem that the inadequate function of market information causes the fluctuation of price and that the unreasonable margin of marketing fosters the speculative actions evermore. 5) Concludings Remarks The first of the important problems to be solved in the marketing process of fruits is to equalize the quantity of sales through the year to prevent the concentrated sale just after the harvest. To solve this problem it is necessary for the producers to have sufficient facilities for storage and to get more financial helps from the banks or public finance sources. It will be also necessary for the producers to have the rapid and correct informations of the market. Next problem is to prevent the speculative actions of the middlemen in the marketing process of fruits. This problem may be solved by the improvement of facilities and services of the central wholesale market, that is, by the larger and more speedy dealings. If this is possible, the speculative middlemen will be eliminated from the marketing process steadily. In other words, the central wholesale market should be helped to perform its function to control the quantity of supply and demand of fruits more completely and to fix the proper price system. Finally it should be pointed out that the standardization of dealing unit and the regularization of qualities are also the basic tasks to prevent the speculative actions and illegal dealings of the middlemen. Consequently, in order to solve these basic problems, the government must take some measures to meet the situation. In short, if the government can make up the institutional basis for the fair dealings, and does its best to improve the facilities or the external factors of dealings, and at the same time it can organize the speculative merchants insttutionally to be controlled, the unorgainized merchants will be weeded out from the process of competition and the problem of disturbing the marketing process by the middlemen will be also solved accordingly.