As Flour Prices Soar, Livelihood Economy Faces 'Domino Effect'... Government Steps in with Treasury Funding

Global Adversities Lead to Soaring Domestic Flour Prices
Struggling Small Business Owners... Increased Burden on Ordinary Consumers' Grocery Bills
Government Makes First Treasury Injection to Stabilize Flour Prices
On Site, "Price Changes in Distribution Stages Are More Important"

On the 18th, a citizen purchasing flour at a large supermarket in Seoul. The photo is unrelated to specific expressions in the article / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung, Intern Reporter Song Hyundo] Recently, adverse factors such as consecutive droughts in wheat-producing countries and the Russia-Ukraine war have overlapped, causing wheat flour prices to soar. The import price of wheat, the raw material for flour, has also skyrocketed. As a major ingredient for self-employed businesses such as noodle shops and snack bars, as well as a staple ingredient for 'common people's food' like bread and snacks, the rise in wheat flour prices inevitably places a heavy burden on the livelihood economy. The government is making every effort to curb wheat flour prices, even going so far as to provide the milling industry, which processes wheat flour, with its first-ever national treasury support, but concerns remain on the ground that the practical impact may not be guaranteed.

According to the Korea Consumer Agency's information service 'Chamgagaek', the average price of 1kg of medium-strength multipurpose Gom Pyo wheat flour currently on sale was 1,610 won as of the 20th, an 18.6% increase compared to last year (1,357 won). The price of Baeksul glutinous wheat flour (1kg), used for dumplings, noodles, and pancakes, rose 11.2% from 2,290 won in January to 2,546 won this month over four months.

The surge in the import price of wheat, the raw material for flour, is even more severe. According to the Korea Agro-Fisheries & Food Trade Corporation's Food Industry Statistical Information, as of the 16th, the price per ton of wheat was $458.38 (about 573,000 won), a staggering 76% increase compared to last year. Considering that it takes time for raw material price increases to be reflected in wholesale prices, there is a possibility that wheat flour prices will rise much more several months from now.

Some worry that the wheat flour price surge may continue into next year. Already, wheat-producing countries such as the United States, Canada, and China are expected to see a decrease in total production this year due to persistent abnormal heat and drought. Ukraine, once called the 'breadbasket of Europe,' has had its grain export routes blocked since Russia's invasion, with Black Sea ports sealed off.

Wheat harvest scene in Luhansk Province, Ukraine's breadbasket region. / Photo by Yonhap News

Bakers, snack bar owners, and restaurant operators, who are sensitive to wheat flour price fluctuations, cannot hide their anxiety. One business owner running a dessert shop wrote in the self-employed and small business community 'Apeunikka Sajangida' (Because It Hurts, It's the Boss), "Strong flour that used to cost 27,000 won per 20kg sack has recently risen to 35,000 won. It was shocking."

Another owner said, "I sell hotteok (Korean sweet pancakes) for 1,500 won each, but now I can't even cover the ingredient costs with that. My hands are trembling," and appealed, "Bosses, if you know of any suppliers where we can buy (wheat flour) in bulk at a cheaper price, please let me know."

The prices of processed foods that use wheat flour as a main ingredient, such as ramen, noodles, and snacks, have also risen one after another. According to Chamgagaek, ramen prices rose 8.9% compared to last year as of last month, and jajangmyeon (black bean noodles) increased by 9.4%. Various snacks have increased by 6-16% depending on the brand.

Given this situation, the government has even announced measures to minimize wheat flour price increases by providing national treasury support to the milling industry. On the 30th of last month, at an extraordinary Cabinet meeting presided over by Prime Minister Han Duck-soo at the Government Seoul Office, the second supplementary budget bill worth 62 trillion won was approved, confirming 2.2 trillion won for livelihood and price stabilization support projects.

The rise in flour prices can also cause significant damage to self-employed individuals and small business owners such as bakeries, snack bars, and restaurants. / Photo by Yonhap News

The 'Wheat Flour Stabilization Project' included in this support program involves the government providing subsidies to the milling industry, which processes wheat into flour and supplies it to small business owners and food companies. A total of 54.6 billion won will be invested, with the government covering 70% of the wheat flour price increase in the second half of this year, 20% borne by the producing companies, and consumers only responsible for 10% of the total price increase.

Regarding this, Minister of Agriculture, Food and Rural Affairs Jeong Hwang-geun, during a visit to a milling factory in Incheon on the 23rd of last month, said, "We will introduce for the first time a support project that compensates 70% of the wheat flour price increase in the second half of this year," and urged, "We will also consider ways to ease the burden on the milling industry, so the industry should also strive for livelihood stabilization."

However, the industry's response is somewhat lukewarm. A representative of a wheat flour distribution company A explained, "When rice flour prices soared the year before last, the government released rice flour stock to slightly ease prices. Although this policy is not exactly the same, I think it might have a similar effect." However, he added, "This support plan involves milling companies receiving national treasury subsidies. If this policy leads to lower supply prices, it would be meaningful, but it is uncertain how prices will change at the distribution stage. It will be difficult to feel price relief at the distribution site."

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