Tofu Factory Zuldosan Crisis, Overflowing Domestic Soybeans, Why?

a small tofu factory used to wake up every morning with a savory smell and the sound of grinding beans. one day, the sound stopped, and the owner sighs deeply as he looks at the empty warehouse of ingredients. it's not just because the economy is tough: hundreds of tofu factories and soy milk companies across the country are facing the prospect of closing down due to the lack of their raw material, soybeans.

there are warnings that tofu, the most familiar ingredient on our tables, could be on the way out, but that's strange. the news says domestic soybean production is at an all-time high, so why are tofu factories shutting down for lack of soybeans? Let's take a look at this bizarre situation to get to the bottom of it.

a stalled machine: the tofu factory crisis is real

right now, countless small and medium-sized tofu manufacturers across the country, including over 120 tofu factories in Gangwon Province, are facing the worst of all worlds: shutting down due to a lack of raw materials. And it's not just tofu, it's soy milk as well. the production lines of tofu and soy milk, the national protein source, have come to a standstill, literally setting the stage for the 'tofu crisis'.

the direct cause of the problem is the 'imported soy shortage'. surprisingly, about 80% of the tofu on the market is made from imported soybeans, especially US soybeans. But this year's soybean imports have plummeted by more than 13%P from last year, causing an industry emergency. At least 10,000 tons more soybeans are needed by the end of the year, and there's nowhere to get them. "At this rate, we will run out of raw materials by mid-October and be forced out of business," said a representative of a local food company, expressing desperation. The damage is snowballing, especially for small businesses that don't have their own stockpiling capabilities.

a surplus of domestic soybeans, but not enough to go around

if imported beans aren't available, why not use domestic beans? it's a perfectly reasonable thought, but the reality is quite the opposite. right now, warehouses are overflowing with domestic soybeans. that's because the government has encouraged production by giving farmers who plant soybeans a subsidy of 2 million won per hectare to solve the problem of rice overproduction. As a result, production rose from 130,000 tons three years ago to 155,000 tons last year, and is expected to rise further this year.

a threefold price difference

however, tofu factories are looking at the surplus of domestic soybeans like rice cakes in a painting. imported soybeans cost about 1,400 won per kilogram, while domestic soybeans cost about 5,000 won per kilogram, more than three times more expensive.

it's like a local bakery that used to sell bread for 1,000 won is suddenly left with flour that costs three times as much. If you make bread with that flour, you'll have to charge 2,500 won, but will customers buy it? The same is true for tofu factories. The market is already divided between cheap imported soy tofu and premium domestic soy tofu, and if you suddenly raise the price, you will lose competitiveness and have no choice but to close your doors. This is the core of theserious tofu factorycrisis.

why are domestic soybeans so expensive?

there are structural reasons for the high price of domestic soybeans. first, there are productivity limitations. unlike the U.S., where soybeans are produced by large-scale mechanized farming on vast plains, we produce soybeans on a relatively small area of arable land at a higher cost.

second, high government support prices. the government buys domestic soybeans at a high price in order to preserve farmers' incomes and increase food self-sufficiency. This policy has allowed farmers to have a stable soybean farming business, but it has also made the market price uncompetitive with imported soybeans. In the end, a paradoxical situation has arisen where a well-intentioned policy has actually stifled the market.

the root of all problems: a dysfunctional soybean import structure

when we dig into the root cause ofthe tofu factory crisis, we come face to face with an outdated system called the "state-owned trade system. currently, Korea's soybean imports are virtually monopolized by the Korea Agriculture, Fisheries and Food Distribution Corporation (aT).

if a private company wanted to import soybeans directly, they would have to pay a staggering 487% tariff, while the aT is allowed to import soybeans at a tariff as low as 5% under WTO agreements. this huge tariff barrier makes companies cry and eat mustard, forcing them to source soybeans through aT.

recently, aT held a public auction for 9,000 tons of soybean import rights, but the competition was so fierce that the winning bid was nearly double what it was last year. To make matters worse, even if aT wins the auction, it will take at least two to three months for local trading, sea transportation, and customs clearance, which is not enough to solve the immediate shortage of raw materials. In the end, thecurrentstructure of soybeanimportation, which relies on a single point of contact, aT, is fuelling the crisis.

where does the solution lie?

the government is offering short-term remedies, such as offering discounted domestic soybeans from stockpiles and considering additional imports of US soybeans. but these are band-aids, and not the solution.

experts say the system needs to be reformed for the long term. first, they call for a realistic adjustment of the 487% tariff barrier to allow private companies to import soybeans directly at lower tariffs.

in addition, efforts should be made to secure stable demand for domestic soybeans. For example, mandating the use of domestic soybeans in the public sphere, such as school lunches or military payments, would provide farmers with a stable outlet and processors with predictable planning. only by creating a virtuous cycle from production to processing, distribution, and consumption will we be able to solve the problem of unstable soybean supply and demand and prevent anothertofu factory crisis.

conclusion

the current tofu factory crisisis not just about a shortage of soybeans. It's about a disconnect between policies designed to protect farmers, market realities, and rigid import structures. If we don't address these issues, we may not see affordable, nutritious tofu on our tables anytime soon.

what do you think about this complex issue? What choices do we have to make between supporting farmers, food security, and stable prices at the table? we'd love to hear your thoughts in the comments. and don't forget to subscribe and sign up for our newsletter for more in-depth analysis!