DPRK FOOD SITUATION: BAD, AND POSSIBLY CRITICAL

C O N F I D E N T I A L SEOUL 001737

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E.O. 12958: DECL: 05/23/2016
TAGS: EAID EAGR PGOV PREL KS KN
SUBJECT: DPRK FOOD SITUATION: BAD, AND POSSIBLY CRITICAL


Classified By: EconMinCouns Kurt Tong for reasons 1.4 (b,d).

SUMMARY
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1. (C) We have recently seen a number of predictions that
North Korea is, or will soon be, suffering a situation
similar to the famine of the middle and late 1990's.
Disruptions in distribution of rations and reports of
localized food shortages are cited as the main proof of an
impending crisis. Some experts also cite evidence that the
2005 harvest was less bountiful than initially reported.


2. (C) South Korean analysts and government officials believe
that the food situation will indeed remain quite desperate
during 2006. They blame the DPRK's return to the Public
Distribution System (PDS),compounded by the expulsion of
most NGO's -- most importantly the World Food Program (WFP)
-- for the possible famine. Still, South Korean experts
think that some significant additional factor -- some kind of
natural or man-made disaster -- would be needed for North
Korea to reprise the widespread starvation of the 1990's.
The Embassy's view is that, given the difficulty that North
Korea will certainly experience trying to prevent black
market behavior, the risk of a major famine should not be
discounted. End summary.

DPRK GOVERNMENT TO BLAME
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3. (C) EconOff spoke with Kwon Tae-jin, Senior Fellow at the
Korea Rural Economic Institute (KREI),about reports of an
impending food crisis in the DPRK. Dr. Kwon is widely
regarded as a leading government expert on the North Korean
agricultural economy, and has the benefit of access to a
variety of Korean government sources on North Korea.
According to Kwon, the availability of food in North Korea
has tightened for a number of reasons. First, April, May and
June are historically lean months for Koreans, as winter
stocks are consumed and the first harvests of the new year
are not yet ready. While South Korea has advanced beyond

this simple fact of agrarian life, the North still suffers
from the annual phenomenon.


4. (SBU) However, the more important causative factor for
upcoming shortages, Kwon said, is the re-establishment of the
Public Distribution System by DPRK officials, and the
coinciding ban on private trading or retailing of grain. As
the North Korean central government attempts to regain
control over food supply and distribution channels, those who
have food to sell are holding it closely, in order to avoid
seizure of their food stocks. Those with illegal stocks seek
to avoid punishment for hoarding. In Kwon's opinion, the
DPRK's localized food shortages are largely attributable to
this combination of seasonal shortages and inefficiencies
inspired by the PDS.


5. (C) At the same time, Kwon downplayed the concern
expressed by some that North Korea could be facing a
full-fledged famine. The cries of alarm, he said, are coming
mostly from NGO's and non-expert individuals working in the
DPRK. "They are always alarmists," he quipped.
Interestingly, Kwon told us that because KREI has no
counterpart organization in the DPRK to rely upon as a
partner, he himself uses NGO channels to visit and conduct
direct research on the North.

UNIFICATION MINISTRY NOT WORRIED
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6. (C) EconOff also met with Kim Jin-goo, Director for
Humanitarian Assistance Planning at the Ministry of
Unification. Kim similarly downplayed predictions of a
crisis situation. Kim explained that North Korea has had a
chronic shortage of food over the past decade, following the
famine of the 1990s. In that context, Kim said, the South
Korean government -- while not yet prepared to "regularize"
food assistance to the DPRK -- has accepted that it will have
to continue to provide food and fertilizer assistance in
order to avoid another large-scale famine. Kim insisted that
the South Korean government would continue to evaluate each
DPRK demand for assistance on a case-by-case basis.


7. (C) When asked about the status of South Korean food
assistance to the DPRK for 2006, MOU's Kim responded that no
decision had been made yet on rice shipments. He went on to
declare that rice shipments to North Korea, averaging between
400-500,000 tons annually for nearly a decade, are not
automatic and that the ROK government would have to discuss
the DPRK demand. When a decision is made to send more rice,
it would take two months to procure, ship, and deliver the
rice to individual recipients in the DPRK.


8. (SBU) Meanwhile, on the fertilizer front, the South has
already completed a shipment of 150,000 tons of fertilizer
this year and the second shipment of fertilizer -- amounting
to some 200,000 tons -- began in mid-May and is expected to
be completed by mid-July. According to Kim, the South Korean
government has not yet decided whether it will send the
remaining 100,000 tons of fertilizer sought by the North.

FUTURE'S NOT BRIGHT
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9. (SBU) According to studies conducted by KREI, DPRK crop
yields continue to fall year by year. The decline stems from
a reduction in arable land and a reduction in productivity
due to advancing soil degradation. According to studies by
KREI's Kwon, without the fertilizer assistance provided by
the South, North Korea's rice yields would be only fifty
percent those of the South. With the fertilizer assistance,
northern rice growers can achieve per hectare yields equal to
ninety percent of their southern counterparts.


10. (SBU) North Korea's food requirement is around six
million tons annually. KREI, while unable to make precise
forecasts, predicts that the harvest for this year will yield
only about four million tons. When combined with the nearly
half-million tons the South has traditionally dispatched to
the DPRK, plus China's food assistance, plus the food
distributed by WFP, the food situation will be bad, but not
terrible, according to Kwon.


11. (C) In a surprising confession, Kwon claimed that the
reason South Korea has been sending approximately 400-500,000
tons of food is simple: that is the amount of surplus rice
produced by the South's farmers. If the South Korean
government wanted to send more than that, it would be forced
to import the difference. Therefore, even though the South
Korean government realizes that the North needs more food,
Southern officials are hesitant to import, and pay for, rice
that would subsequently be shipped north.


12. (C) We spoke to Kwon just days before the announcement of
WFP's letter of understanding for a smaller-scale operation
in North Korea. Kwon predicted then that once WFP reached an
accord with the DPRK, the South Korean government would make
a donation, probably equal to years past, for distribution
through WFP's program. During our meeting with MOU's
Director Kim, he verified continued South Korean support for
WFP and deflected further questioning by asking whether the
USG had received a donation request from WFP, and if so what
the likely response would be.

COMMENT
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13. (C) Although we have little independent evidence to cite,
and we hope we are wrong, the Embassy's view is that NGO
assertions concerning the risk of a major famine should not
be casually discounted. All reports indicate that the DPRK's
Public Distribution System has become seriously dysfunctional
over the past decade, with change accelerating during the
four years since the July 2002 economic reforms. The key
difference between the current situation and the 1990's is
that market behavior has been learned by a larger proportion
of the North Korean populace. Once learned, such behavior is
not easily unlearned, and therefore there is every reason to
expect that a vibrant black market will soon emerge for North
Korean grain. Anticipating those black market opportunities,
in turn, North Korean farmers and others with access to
wholesale stocks or distribution channels have every

incentive to divert and hoard supplies for sale at inflated
prices in black markets, outside the PDS.


14. (C) If such a scenario does transpire, DPRK authorities
will certainly try in the first instance to stamp out black
marketeering. But in light of internal communication
problems and spreading corruption in the North, it would seem
unlikely that the regime could be entirely successful in
preventing hoarding. Given the narrow margin of food
supplies, the default response might then be to lower PDS
rations, punishing (again) the politically weak in the DPRK.
With its reduced supplies and contrained geographical reach,
the WFP is also less capable than before of reaching the
neediest North Koreans.
VERSHBOW