Will Grain Price Surge Push Up Table Food Prices Further? Food Industry Closely Watching

RUS-UKR Crisis Drives Global Grain Prices Up
Government Takes Action Amid Feed Industry Losses
Prolonged Conflict May Trigger Chain Effects in Food Sector
"Short-Term Impact Limited but Could Lead to Price Increases"

In the third quarter of this year, domestic food prices in Korea rose by 5.0% compared to the same period last year, marking the fourth highest increase among OECD member countries. According to Statistics Korea and the OECD on the 5th, the prices of food and non-alcoholic beverages in Korea during the third quarter (July to September) increased by 5.0% compared to the same period last year. Although the prices of agricultural, livestock, and fishery products, collectively known as food prices, stabilized in October, slowing the increase to 1.6%, both agricultural, livestock, and fishery products and processed food prices surged again in November, rising to 6.1%. The photo shows a large supermarket in downtown Seoul on the 5th. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Song Seung-yoon] As prices continue to soar to unprecedented levels, concerns are emerging that the domino effect on food prices could worsen further due to the military conflict between Russia and Ukraine.

According to industry sources on the 25th, wheat produced in Ukraine accounts for 12% of the world's exports. Corn accounts for about 16%. Because Russia and Ukraine have a large share in production and exports, the intensifying conflict between the two countries has caused prices of these commodities to skyrocket. As of the previous day, wheat reached $9.34 per bushel on the Chicago Board Options Exchange (CBOE), the highest since 2012. Corn prices rose to $7.13, the highest in eight months, and soybean prices increased to $16.97, the highest in nine years. If this situation prolongs, international wheat prices are expected to rise further. Already, countries with high wheat import shares, such as Egypt, are showing signs of wheat price surges.

South Korea mainly imports feed wheat and corn from Russia and Ukraine, but domestic food companies do not rely heavily on raw materials from these countries. Therefore, the industry expects the short-term impact to be limited. However, if the conflict prolongs, the overall price increase impact will be unavoidable. The feed industry is the most concerned sector. The domestic feed industry has a high dependence on feed wheat and corn imported from Russia and Ukraine. An increase in feed prices could lead to higher prices for meat such as pork. Processed food companies that use wheat as a main ingredient may also face pressure. In this case, processed foods such as ramen, bread, and noodles, as well as dining-out prices, could be affected. Ramen and snacks, which mainly use wheat and soybean oil as raw materials, are expected to face price pressures first.

Domestic flour prices rose 8.8% in December last year and increased by 12.1% in January. In the case of ramen, the three major ramen companies already raised prices on key products between July and August last year. At that time, Nongshim raised prices by an average of 6.8%, Ottogi by 11.9%, and Samyang Foods by 6.9% per product. Price increases for snacks are also expected to follow one after another. Nongshim plans to raise the shipment prices of 22 products, including Saewookkang and Yangpokkang, by an average of 6% starting next month, marking the first increase since 2018.

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