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North Korea: Witness to Transformation

The latest FAO/WFP Crop and Food Security Assessment

by | November 15th, 2012 | 06:19 am
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The newest assessment of the food situation in the North Korea by the FAO and WFP is likely to spark controversy. The UN agencies have been issuing joint assessments since the 1990s, and the quality of these reports has grown over time.  In the latest, released earlier this week, the agencies mention taking Korean-speaking international staff into the field, as well as two observers, one from the EU and the other from Australia.

According to the report, the supply-side situation is improved, with the most recent harvest about a 10 percent improvement over last year, and other sources of supply (imports, aid) roughly stable. The report of a good harvest is consistent with a recent eyewitness account. The impact of drought was less than expected, the timely provision of inputs boosted yields, and increases in the state procurement price either elicited increased effort or simply coaxed supply back into the system.  While domestic fertilizer production is down, the FAO reports a dramatic increase in application of imported fertilizer though it does not indicate the source. The report also indicates that for the first time the assessment team was able to use more direct techniques to calculate yields. Their conclusion of improved yields appears to contradict one of declining yields recently produced by the International Federation of Red Cross and Red Crescent Societies (IFRC). Yet, even with the improved harvest, according to the report, grain production has not recovered to the levels achieved prior to the collapse of the economy in the early 1990s.

The overall deficit is just over 200,000 metric tons, the lowest in years.  To scale this deficit, the price of Southeast Asian rice is $450-550 per ton.  That implies that one could address the FAO’s balance sheet shortfall for approximately $100 million—a small sum even by North Korean standards.  If the assessment is correct, then contrary to some recent commentaries, North Korea’s needs are relatively modest and do not amount to a looming catastrophe.

But is the impression left by this relatively positive supply-side story correct? The report also contains material derived from a survey of 95 households with the caveat that “the sample cannot be treated as representing the entire population as it is too small and not drawn in a random statistical manner. The results presented in this report should, therefore, be considered indicative only.” But are the results even that?

The results reported for household sources of food are puzzling. For public distribution system (PDS)-eligible households (effectively the urban population) the food source shares are: purchased at state shops, 42 percent; obtained from public distribution centers (PDCs), 23 percent; gift or barter, 16 percent; home grown, 12 percent; aid, 4 percent; hunting and fishing, 3 percent; and purchased in the market, 1 percent. The shares for cooperative farm households are not much different with the purchased at state shop the single biggest source of food at 33 percent.

These figures are really quite astonishing. If correct, urban households are growing nearly one-sixth of their food themselves, and hunting and fishing is a much more important source of food than the market, as is aid.

According to this survey, food accounts for 39 percent of household expenditure, fuel 18 percent, and clothing 13 percent.  Prices at the state shops and PDCs are subsidized.  So if the average household really only obtains 1 percent of their food via the market, then the inflating prices reproduced in recent posts are effectively irrelevant.

The assessment then reports that 40 percent of the households interviewed received WFP food assistance.  But aid from all sources (including China) accounts for less than 3 percent of consumption (if one calculates the percentage via the balance sheet) or 4 percent (according to the household survey).  If both of these claims are true, then rather than targeting vulnerable populations, the WFP is shot-gunning minute amounts of aid across a large swath of the population.  For the WFP’s sake, I hope that the 40 percent figure derived from the 95 household survey is in fact not at all representative of the whole population.

The assessment next addresses food insecurity and nutritional status. While the respondents reported improvements in food security relative to the past year, 90 percent of those receiving PDS rations express anxiety about not having enough food to eat. Using standardized measures of food insecurity, over half of those households receiving PDS rations are classified as severely food insecure and only 2 percent are classified as food secure.

The assessment does not report any follow up to the 2009 analysis that found a high incidence of stunting, a sign of chronic malnutrition, among children. It does, however, report more recent data on more short-term indicators of acute malnutrition that may vary seasonally with the availability of food. UNICEF found a significant drop in acute malnutrition rates among children aged 6 to 59 months between September-November 2011 (during what the report argues was the end of the lean season) and February 2012, reinforcing the notion of improvement in the past year.

So to review, according to this report, (1) the supply situation is improving, (2) households get more than 60 percent of their food through state stores or the PDS at subsidized prices (3) the role of the market is negligible, so implicitly the rapidly rising prices we have reported are immaterial, (4) food insecurity while bad is improving, and (5) the basic needs import gap could be closed for about $100 million.

Alternatively, one could argue that the improved harvest figure is partly illusory. In previous years grain was diverted out of state controlled channels and not recorded. The significant increase in the procurement price this past year meant less diversion and hence a higher recorded harvest. Some of the reported increase is genuine, some of it is not.

On the demand side, I find it very hard to square the household expenditure results derived from the 95 household survey with my prior beliefs formed by extensive analysis of the economic behavior of North Korean households.  My sense is that the survey overestimates the role of subsidized food delivered through state controlled channels and underestimates the role of the market.  Ironically, if the assessment is accurate, then food insecurity derived from economic vulnerability should be lessened, though if the state is really playing that central a role in the distribution of food, the possibility of political vulnerability a la the 1990s famine is revived.  My skepticism about these sources of food results is reinforced by the food insecurity findings that paint a dire picture, especially for PDS-recipient households.

It seems to me that it takes a lot of shoehorning to get all these claims to fit together.

That said, North Korea is a hard target and the international relief agencies that labor there work under difficult conditions. It is a thankless task and utter clarity is not to be expected.  I suppose that the one thing on which we can all be certain is that this report is not the final word on North Korean food insecurity.