North Korea plans to allow farmers to keep more of their produce in an attempt to boost agricultural output, a source with close ties to Pyongyang and Beijing said, in a move that could boost supplies, help cap rising food prices and ease malnutrition, Reuters reported.

The move to liberalize agriculture under new leader Kim Jong-un, who took office in December 2011 after the death of his father, would reverse a crackdown on private production that started in 2005. It comes amid talk that the youngest Kim to rule the impoverished North is considering reforms to boost the economy.

"Peasants will have incentive to grow more food. They can keep and sell in the market about 30-50 percent of their harvest depending on the region," said the source.

At present, most farm output is sold to the government at a state auction price that has diverged from the market rate.

North Korea experienced a devastating famine in the 1990s from which its economy has not recovered, and a third of its population is malnourished, according to UN estimates. The country needs about 5 million tons of grain and potatoes to feed its people and since the early 1990s its annual harvest has been 3.5-4.7 million tons, according to most observers.

Experts in South Korea believe the North desperately needs fertilizer to boost yields in a country where soil has been degraded by erosion due to poor farming techniques.