Prices of imported grains likely to spike by over 10 percent

Imported grain prices are expected to rise by more than 10 percent over the 2nd quarter compared to the first three months of this year. Added to the increase of more than four percent in prices in March, higher grain prices will only put an increasing upward pressure on food prices.

The import unit value index of edible grains is projected at 158.5 in the second quarter of the year, up by 10.4 percent on a quarter-on-quarter basis according to the April issue of “International Grains” released on Thursday by the Center for Agricultural Outlook Korea Rural Economic Institute (KREI). Likewise, the index in question for feed grains is estimated at 163.1, up by 13.6 percent compared to the 1st quarter. Both the indices show the highest increase rates in 14 years since the 4th quarter of 2008 (October-December), caused by increasing international grains, the rise of won-dollar exchange rates and higher maritime freight charge following Russia’s invasion into Ukraine.

A state think tank also diagnosed that the domestic economy may be constrained from rebounding if prices of raw materials including grains continue to soar. The Korea Development Institute (KDI) assessed in “Monthly Economic Trends 2022 April” issued on Thursday that the South Korean economy is faced with greater downward pressure as external environmental conditions are only worsening due to Russia’s invasion of Ukraine.

Seeing “the prolonged situation in Ukraine” as one of the strongest downside risks, the report analyzed that continuous spikes in prices of raw materials are likely to keep inflation rates high and accelerate interest rate increases, thus holding back economic recovery.

Prices are already rising sharply in markets for crude oil, nickel and wheat where Russia and Ukraine have remarkably high market shares. As of Wednesday, Dubai crude oil rose to 103.79 U.S. dollars per barrel by 7.2 percent compared to late February. Nickel prices surged to 33,600 dollars per ton by 33.1 percent over the same period.


Hee-Chang Park ramblas@donga.com