The worrisome decline in food consumption in 2013

One inevitably runs into a myriad of unknowns when researching any aspect of North Korea – we at Rice and Iron are certainly no strangers to inconsistencies in data. This post will quickly shed light on one such mystery.

Conventional analysts dealing with food security in North Korea emphasize the importance of aggregate supply of food production – in fact, many start with that presumption and seek to answer why food production has declined since Pyongyang reached its long-sought goal of food self-sufficiency in the 1980s. It is here that we find Woo-Cumings highlighting the devastating impact of climate change on North Korean food production capabilities and Chong-ae Yu pointing to the consequences of long-term soil fertility degradation via intensive industrial agricultural practices.

In response to existing literature, Rice and Iron has sought to add the following to the discussion:

  • In opposition to Woo-Cuming’s argument that the supply-side factors (grain output decline) trump the demand-side causes (loss of income) of the famine in North Korea, we seek to reassert the primacy of Amartya Sen’s concept of entitlement in analyzing both the famine and the ongoing struggle to secure consumption in the country
  • In response to Chong-ae Yu analysis, we have sought to answer why industrial agricultural practices were implemented in the first place. In our research, we found that the dissolution of a free domestic food markets played a critical role in undermining the ability of the state to optimally allocate goods to consumers and resources to food producers, leading to the misuse of petro-chemical fertilizers in Pyongyang’s blind attempt to increase output to resolve the distortion.
  • At the core, we emphasize the importance of the market as both a conduit of information for optimal grain production and the foundations for food security in the DPRK; therefore, the decline in food prices, stability of North Korea’s currency, and adequate wages are of the utmost importance in our analysis.

Given our focus on market conditions and affordability of food, we were pleased to see the decline in food prices in select North Korean cities in 2013.

Food prices in select North Korean cities

based on data collected by DailyNK

Granted, there exists a significant urban bias in both income and availability of goods and both Sinuiju and Hyesan have easier access to Chinese markets than other parts of North Korea; nonetheless, the fact that prices are coming down is a positive sign.

based on information collected by DailyNK

based on data collected by DailyNK

More importantly, the level of volatility in the food prices in these select cities decreased in 2013 compared to previous years – this is a very good sign as the stability of food prices allows people to better anticipate future prices, preventing hoarding behavior and other collective actions that drive up scarcity.

Why did this happen? We noted in a previous article that the decline in food prices correspond with the stabilization of the Korean people’s won (KPW) vis-a-vis the US dollar (USD) in early 2013.

based on data collected by DailyNK

based on data collected by DailyNK

This is something that will require continued assessment, but we have raised concerns that the exchange rate and the value of the KPW are being propped up by Pyongyang’s export of reserves and expansive deficit spending. If true, there should be greater concern for what will happen to the economy and the nation’s food security once Pyongyang runs out of resources to continue bolstering the fragile KPW. There are already signs that the state’s capacities are extremely strained.

In any case, given the abovementioned data, it would be reasonable to expect overall food consumption in the country to have increased and food insecurity to have decreased in 2013 compared to 2012. Prices were in a downward trend in 2013 and market volatility had significantly calmed.

But according to the Crop and Food Security Assessment Mission’s (CFSAM) 2013 assessment of food security in the DPRK, the average food consumption score (FCS) decreased marginally in 2013 compared to 2012.

The FCS weighs the people’s consumption based on a basket of food stuffs, taking into consideration several factors such as energy density, dietary diversity, food frequency and relative nutritional importance of different food groups (read more about the food consumption score here); thus, it is a very good indicator of food security in the country. Therefore, the decline in the FCS in 2013 despite all the positive indicators is truly worrisome.

And it is difficult to pin down why this happened.

Initially we considered the hypothesis that perhaps the state’s expanding budget deficit has forced Pyongyang to make significant cuts in the public distribution system – forcing the most vulnerable members of society into greater food insecurity. And this appeared to be consistent with the data provided by the CFSAM assessments in 2012 and 2013.

Note how poor food consumption among the PDS-dependents increased from 27% in 2012 to 37.5% in 2013, far exceeding the rate of increase in poor food consumption for cooperative farmers (24% to 27.6 %).

But grain distribution by the state in 2013 was not weakened – in fact, the public distribution of rations appear to have been about the same, if not more robust, in 2013 than in 2012. Therefore, we cannot confidently claim that the state was reallocating resources from the PDS to other sectors in 2013.

Strangely PDS rations appear to plummet during the lean season every two years

Strangely PDS rations appear to plummet during the lean season every two years

So what led to PDS-dependents being driven into poorer food consumption in 2013?

It is possible that the data is flawed and missing key indicators. And it is important for us to keep in mind that the food consumption score takes into account more than just the intake of grains, it assesses for a balanced diet, thus the widely available data measuring the distribution of cereal captures only part of the necessary information.

In addition, average food prices in select North Korean cities were still higher at the end of 2013 than they were in the beginning of 2012. So it is possible that the PDS-dependents who rely on the state and have little independent income were severely hurt by the high prices in 2013 (as they seek to complement their meager rations with food items bought from the market) despite rice prices continuing to decrease steadily throughout the year.

We are still in the dark when it comes to many critical pieces of information, such as the available sources of independent income for PDS-dependents and the state of markets outside the three select cities that DailyNK monitors. Therefore, we cannot make definitely conclusions.

At the end of the day, we are starved for data – but that’s nothing new either.

More to come.

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About Yong Kwon

Analyst of international relations, writer of history, observer of North Korea's food and monetary policies, and Korea blogger for the Diplomat
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3 Responses to The worrisome decline in food consumption in 2013

  1. This may have been addressed elsewhere, but I wonder to what extent the (to my eye) feverish construction activity in Pyongyang impacts overall inflation? or would I be making a false correlation there? Sorry if this is a bit of an amateurish question; I very much liked this post! Good to see data from Hyesan especially.

    • Yong Kwon says:

      I definitely agree with your assessment on the relationship between investment in Pyongyang and inflation within the country – there is not enough data on wages to definitely pin down a causal relationship, but several articles published on DailyNK noted the disparity in income between laborers in Pyongyang/foreign currency earning enterprises and peripheral/state enterprises (http://www.dailynk.com/english/read.php?cataId=nk01501&num=11831) – this alongside continued increases in wages by the state to guarantee the workers a livable income most likely constitutes a significant expansion in the money supply. This would in turn foster the Cantillon Effect, which Wenli Cheng and Simon D. Angus (http://www.buseco.monash.edu.au/eco/research/papers/2012/1212cantilloneffectchengangus.pdf) summarized succinctly below:

      “Since new money does not reach everyone at the same time, the injection of money increases the purchasing power of those who receive the new money first, enabling them to bid resources away from those who receive that money at a later time. As a result, relative prices will change, resources will be reallocated and income will be redistributed during the time interval between money injection and its final permeation in the economy.”

      The blog has so far looked at two consequences of this phenomenon:

      First, the impact of inflation and the deficit on North Korea’s finances: https://nkfood.wordpress.com/2014/04/14/after-jang-sung-taek-can-north-korea-brave-the-economic-tempest/

      Second, its role in preventing political change/economic reforms from going forward: https://nkfood.wordpress.com/2014/01/24/is-there-or-is-there-not-reform-in-the-dprk-and-some-recommendations/

      It’s in highlighting the second point that we have raised a voice of caution in the wind of optimism that Dr. Lankov appears to champion regarding North Korea’s reform efforts.

      But we could be making a false correlation, definitely, it’s not out of the question – to borrow Donald Rumsfeld’s apologia, there are the known unknowns and the unknown unknowns…

  2. Pingback: Monetary stability and food security | Rice & Iron

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