[Exclusive] Despite Discount Support for Chicken, Prices Remain Unchanged... 1 Billion Invested for Price Stability

On the 5th, at Hanaro Mart Yangjae Branch in Seocho-gu, Seoul, chicken is being sold at a discount as part of the government's agricultural and livestock product price stabilization policy. Photo by Jinhyung Kang aymsdream@

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The government is investing nearly 1 billion won to stabilize chicken prices. Despite a significant drop in wholesale prices due to various price stabilization policies, consumer prices have instead risen. Even within the government, concerns have been raised that prices remain high and are not decreasing easily.

According to a report compiled by Asia Economy on the 5th, the government has decided to invest 940 million won to support discount events at chicken retail stores. This amount corresponds to 940,000 chickens, with a minimum discount of 1,000 won per product. The support will be implemented by Nonghyup, the Korea Broiler Association, and chicken suppliers deciding on unit price reductions and supplying to Hanaro Mart and major large supermarkets. The support period lasts until the end of this year, with Hanaro Mart offering discounts year-round. The program will end early if the budget is exhausted.

An official from the Ministry of Agriculture, Food and Rural Affairs explained, “At the emergency supply stabilization meeting for agricultural products on the 15th of last month, 19.5 billion won was allocated for livestock policies, and a portion of that budget was dedicated to this. We plan to continue monthly chicken discounts going forward.”

This measure is a follow-up to the chicken discount support conducted for two weeks starting from the 14th of last month. The Ministry stated that due to last summer’s heavy rains causing chicken deaths and the occurrence of avian influenza in winter, they used the chicken self-help fund to reduce wholesale prices.

However, an internal report from the Ministry pointed out that “consumer price reductions for chicken are limited.” According to this report, wholesale chicken prices fell 22.3% from 4,166 won last year to 3,235 won currently. Yet, retail prices at the point of purchase rose slightly by 0.5%, from 6,014 won to 6,046 won. Despite the drop in wholesale prices, consumers have not experienced the benefits of price reductions.

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The reason cited was “distribution costs.” Chicken is raised at broiler farms, then delivered through affiliated companies to supermarket headquarters, and finally sold at individual branches. During this process, costs amounting to 50-60% of the retail price typically occur. These costs mainly include transportation, packaging, loading and unloading fees, rent, and labor costs. Although wholesale prices were lowered, rising distribution costs prevented retail prices from falling.

Chicken supply shortages are expected to continue for the time being, so pressure for price increases is unlikely to ease. From the 1st to the 11th of last month, the number of chickens slaughtered was 21.6 million, down 5.3% from 22.81 million the previous year. With supply decreasing, price increases are inevitable, while consumer demand is expected to rise. School meals resumed nationwide in March, and with the arrival of the April holiday season and increased outdoor activities, demand for chicken is expected to grow significantly.

The government has decided to enforce stricter post-management to achieve actual retail price reductions. Companies receiving budget support must present wholesale price standards for supplies to large supermarkets and must prepare contracts and transaction statements detailing transaction prices and supply volumes. If misuse of funds is discovered afterward, the government plans to collect illegal profits and impose penalties up to five times the amount. The government will also evaluate the price reduction effects and whether targets are met during project implementation.

Despite this, experts point out limitations to government-led price reduction policies. Professor Lee Jeong-hee of Chung-Ang University’s Department of Economics said, “For agricultural, livestock, and fishery products, the price reduction effect does not match the amount of money spent. If the structure where various services and incidental costs take up a large portion in the process of passing on to consumers remains unchanged, controlling prices may be difficult.”

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