Supply Disruptions of Imported Food Ingredients Due to COVID-19... Grocery Prices Rise

Australian Drought and COVID-19 Impact Reduce Wheat Exports
US and Europe Face Factory Closures and Declining Operating Rates
Imported Beef Supply Instability

[Asia Economy Reporter Seungjin Lee] The global spread of the novel coronavirus infection (COVID-19) is causing instability in the supply of imported food ingredients. In particular, prices of flour and beef, which are the main raw materials used in processed foods, are rising, causing grocery prices to gradually increase.

According to Chamgagyeok, a comprehensive price information portal site operated by the Korea Consumer Agency, prices of major flour products have all risen this month. For example, the price of Gomppyo multipurpose flour (1kg) rose from 1,376 won last month to 1,443 won. Baeksul medium-gluten flour (1kg) also increased from 1,629 won last month to 1,649 won. Chamgagyeok surveys and provides product prices sold by nationwide distribution channels (large supermarkets, corporate supermarkets, department stores, traditional markets, convenience stores), reflecting actual consumer purchase prices including discounts by distributors.

The possibility of flour price increases has been discussed since last year. Last year, Australia, one of the largest wheat producers, experienced a supply shortage due to drought, causing international wheat prices to soar. In addition, the spread of COVID-19 worsened supply conditions in major wheat-producing countries including Australia. The Korea Rural Economic Institute forecasts that Australia's wheat exports this year will decrease by 1 million tons compared to last year, totaling 8 million tons.

The problem is that processed foods and dishes using flour as the main ingredient are diverse, so if flour prices rise, the ripple effect will be significant. Already, products mainly made from flour such as ramen and bread have seen prices increase recently due to the surge in consumption caused by COVID-19, and the possibility of further increases is high.

According to Chamgagyeok, the price of Samyang Ramen (5-pack) rose from 3,497 won last month to 3,526 won. Shin Ramyun (5-pack) also increased from 3,656 won last month to 3,700 won. Ottogi glutinous rice king dumpling wrappers rose from 1,598 won last month to 1,694 won, indicating that price increases for dumpling products are also expected. The impact of supply instability caused by COVID-19 has not yet been reflected, so prices are expected to rise more sharply in the future.

Imported beef is also experiencing supply instability, and price increases are anticipated. Currently, due to COVID-19, large-scale consumption is not occurring as meal service companies have suspended operations, so there have been no significant price changes yet. However, as imports sharply decrease, it is expected to affect grocery prices soon.

According to the Korea Meat Distribution Export Association, factories in the US and Europe have closed or sharply reduced operating rates due to the spread of COVID-19, and logistics are not smooth, causing supply problems from those regions. In the fourth week of March, US neck meat rose by 900 won per kg, and Australian neck meat rose by 200 won per kg. Furthermore, if exchange rates are factored in, price increases may become entrenched.

Professor Ikseong Kim of Dongduk Women's University’s German Department (Honorary President of the Korea Distribution Science Association) explained, "Price increases seem inevitable according to the principles of supply and demand," adding, "If the price increase range widens and supply instability prolongs, preemptive measures such as increasing imports should be taken to reduce damage."

This content was produced with the assistance of AI translation services.