10 Agribusiness and Information Management Vol.11 No.1 2019 ISSN 2234-3075(Print) ISSN 2288-7806(Online) Http://dx.doi.org/10.14771/AIM.11.1.2 An Exploratory Study on a Relationship between Changes in Cultivated Area of Major Crops and Farm Income by regions1 - From Comparative Analysis to Optimal Portfolio Analysis - Ikhoon Jang2, Yeonjin Kim3, Dohyeong Choi4, Young Chan Choe5, Guhyun Jung6 Abstract 1. Introduction This study is exploratory research on a relationship between changes in cultivated area of major crops and The agricultural product market of Korea is moving farm income by regions. We investigated level of income, towards an uncertain direction due to various volatility of income, and migration of suitable region environmental factors. After the Free Trade Agreement by climate changes as factors influencing changes in (FTA) with numerous countries such as the United States, cultivated area. Research processes are as follows. First, EU, and Chile, etc. the pressure from price competition we classify the regions where cultivated areas are expanded for domestic agricultural products grew stronger due to or reduced through the trends of cultivated area by region the increase of the amount of agricultural product imports. and crop during recent 10 years. Second, we compare There are also regions where the profitability of the existing the changes in income related factors between groups crops cultivated decreased due to changes in the optimal during the same periods. Finally, the results from portfolio cultivation area. Recently, due to severe weather analysis show changes in stable income-based optimal phenomena such as heat waves and cold waves, there crops. From these procedures, we found that the changes are an increasing amount of cases where the productivity in cultivated area are not simply explained by of crops worsened. As such, gaining a stable agricultural income-related factors. In cases of vegetables, however, profit is becoming uncertain. we also found that high volatility of income could Rapid change in the agricultural population is also one contribute to reduce cultivated area of the crops. The of the causes that increases the uncertainty of agricultural results from portfolio analysis are not always consistent profit. Due to aging society, it is becoming difficult for in all of cases. This means that crop selection can be farming households who are reducing cultivation size decided by other factors than stable income. to achieve economic effect due to the decrease of gross profit together with size, thus leading the decrease of profitability. For those who become farmers through family business succession or those who newly became 1 This study has been conducted with the resource of the Ministry farmers, there is a high possibility for them to bring change of Agriculture, Food and Rural Affairs and support from the Technology Commercialization Support Project of the Agriculture, upon the existing crop system, since they have high Food, and Technology Planning Committee. motivation to introduce new crops. On the other hand, 2 Department of Agricultural Economics and Rural Development, there is high uncertainty for productivity since they do Seoul National University, Korea / [email protected] not have high production technology abilities. As such, crop change or crop selecting decision becomes important 3 Department of Agricultural Economics and Rural Development, Seoul National University, Korea / [email protected] in order to procure a stable agricultural profit, in the midst of increasing uncertainty. 4 Department of Agricultural Economics and Rural Development, In terms of policy, one must determine whether it is Seoul National University, Korea / [email protected] effective to provide policy support at a certain farming 5 Corresponding author / Department of Agricultural Economics and household when there is a need to introduce new crop Rural Development, Seoul National University, Korea / [email protected] types or changing the crop type in order to improve the 6 Institute in Geonggi-do Agricultural Research, Korea / income of farming households. Accordingly, studies were [email protected] Agribusiness and Information Management Vol.11 No.1 2019 11 conducted regarding the influence exerted by population analysis research regarding regional specialized crop type statistical factors, socio-economic traits, and and small area crop types. Also, Return Farm Center environmental conditions of the land possessed by the is providing returning farmer consultations and training, farmland to crop change and selection (Kim & Lee, 2002; as well as information related to returning farming policies. Kurukulasuriya & Mendelsohn, 2008; Seo & Mendelsohn, It is also providing information regarding primary crop 2008; Moniruzzaman, 2015; Khanal & Mishra, 2017). and promising crop type for each city and province. In the perspective of farming households, it is important However, since the crop types are limited and are not to predict how to distribute and expand a certain crop specific – with the provided information being only 5 in which proportion at a limited farmland to increase categories, namely, management scale, average high levels of income. Major studies related to optimal investment costs, annual management fees, average crop selection include studies (Stonehouse et al, 1988; income, farmland price – they are inadequate to be utilized Mainuddin et al., 1997; Raju & Kumar, 1999; Singh, in crop selection decision-making. Although information 2001; Sarker & Quaddus, 2002; Zeng et al., 2010; Filippi related to crop selection are being provided through various et al., 2017) utilizing linear programming (LP) based routes, they are insufficient as research results and sources methodology as the optimized algorithm and studies which can support the decision-making in a comprehensive (Carvallo et al., 1998; Kumar et al., 1998; Benli & Kodal, perspective by connecting all this information. Of course, 2003; Garg & Dadhich, 2014; Li & Guo, 2015) utilizing studies for theoretical contributions in the existing studies non-learning programming (NLP) based methodology. related to crop selection are also important. However, Some studies are using the machine-learning-based it is more pressing to conduct exploratory research which methodology to deduct the optimized issue in crop can become the foundation of related studies and can selection (Fowler et al., 2015; Kumar et al., 2015; Abdi‐ enhance the understanding of crop selection in the Dehkordi et al., 2018). For recent research trends related agricultural environment of Korea. As such, the objective to crop selection, empirical studies are being conducted of this study is to explore what is the optimal crop portfolio in situations facing crop type change and new crop which can achieve high levels of income while being introduction due to climate changes. Kurukulasuriya & stable regionally in the agricultural environment of Korea Mendelsohn (2008), Seo & Mendelsohn(2008), which has great differences by each region. In order to Moniruzzaman(2015) studied the factors which exert do this, one must first understand the changes in influence on crop selection in the situation of adjusting agricultural environment and assist in grasping the primary to climate change, while Khanal & Mishra (2017) studied crop types of each region. To do this, this research will the influence exerted on the farmer’s food and crop first use the agricultural area research information from portfolio constitution by climate threats. Dong et. al.(2016) Statistics Korea from 2001 to 2015 to examine the changes proposed a selecting method for selecting crops in a climate and trends of cultivation surface area in the primary crop change situation. Meanwhile, in Abdi‐Dehkordi et. types of each region for the past 10 years, and go on al.(2018)’s study related to the optimal crop selection, to determine whether the cultivation surface area of the the optimal portfolio is proposed by devising measures representative crop type of each region increased or for water scarcity due to climate change and analyzing decreased. Following this, this research will examine cultivation patterns in diverse irrigation conditions. whether there are differences by each type by comparing While diverse studies are being conducted related to crop the profitability and fluctuation changes of each crop selection, related studies are not being conducted in Korea. type income calculated based on the earning survey data The present research condition in Korea is that there is of Rural Development Administration during the same inadequate verification regarding theoretical foundation period. Finally, by using the optimal portfolio method stated by preceding studies. There is especially inadequate based on linear programming, we will compare the optimal amount of related studies compared to the fact that crop crop type changes of the current time and the 10 years change is occurring regularly due to high geographical ago. Through this, this research will detect which factors diversity and numerous small and mid-sized farming induce the crop selection changes for each region and households. Rural Development Administration is deduct the implication of the results. The terms, providing profitability analysis information for each crop profitability of income and fluctuation, used in this type by publishing resources on the profit of agricultural research are ideas introduced in the portfolio analysis. product by each region annually. Furthermore,