Fear of Eggflation... Still Soaring Food and Beverage Stocks

Grain Export Suspension Until June
Increased Cost Burden on Companies
Expected Justification for Product Price Hikes

[Asia Economy Reporter Kwon Jaehee] Despite the grain price surge triggered by Russia, the world's largest grain exporter, deciding to halt grain exports until June, food and beverage stocks are showing strength.

According to the Korea Exchange as of 9:30 a.m. on the 18th, HiteJinro is trading at 37,850 KRW, up 1.48% from the previous trading day. HiteJinro has been steadily rising for three months since hitting a low of 27,800 KRW on January 28. At the same time, CJ CheilJedang is trading at 353,500 KRW, up 0.43% from the previous day. Nongshim hit a low on the 15th and began to rebound from the 16th, closing higher for two consecutive trading days.

However, the current international situation does not seem favorable for stock price increases. The war between Russia and Ukraine, combined with agflation (the sharp rise in grain and agricultural product prices), has increased cost burdens for food and beverage companies. Inflation concerns existed even before the war, but Russia's announcement to suspend exports of major grains including corn and wheat until the end of June has poured fuel on the fire. The war between Ukraine, the breadbasket of Europe, and Russia, the world's largest grain exporter, has increased the burden of grain price hikes due to supply chain uncertainties. South Korea's grain import value reached $758 million (approximately 943.3 billion KRW) last month, nearing 1 trillion KRW.

Despite this situation, the rise in food and beverage stocks is analyzed to be because the grain price increase can serve as a justification for product price hikes. Companies with strong brand power that have high price pass-through ability and effective price increases are gaining momentum in their stock prices.

Park Sangjun, a researcher at Kiwoom Securities, said, "Major food and beverage companies have focused on price increases from the end of last year to early this year," adding, "If the current uncertainty continues, major food and beverage companies may implement another round of price hikes in the second half."

Jang Jihye, a researcher at DS Investment & Securities, interpreted, "In fact, price increases have been mainly implemented by leading companies such as those in ramen and soju," and "Considering the low possibility of market share changes for these companies, the price increase effect is expected to be clear despite the rising cost burden."

Shim Eunju, a researcher at Hana Financial Investment, forecasted, "With the dining-out price inflation rate hitting a 13-year high, consumer demand may increase due to a preference for eating at home."

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