Grain prices drop 33% globally, while domestic bread prices rise 12%

Despite a notable reduction in global grain prices, which have fallen more than 30% over the last two years, offering a semblance of market stability, the price index for South Korea’s domestic processed foods has taken an upward trajectory, increasing by over 10%. This trend has raised concerns that the dip in raw material costs for food is not being adequately or swiftly mirrored in local price adjustments.

On Monday, the Food and Agriculture Organization reported that the global food price index for the previous month stood at 117.3, marking a significant 26.8% decrease from March 2022's high of 160.3. During that period, food prices surged, primarily due to the Russia-Ukraine conflict and ensuing global supply chain disruptions. Notably, within the index's five constituent categories, the indices for oils and grains saw declines of 52.0% and 33.1%, respectively, over a span of 23 months.

Conversely, processed food prices in South Korea experienced a 10.3% hike during the same interval. This is despite a marked plummet in the global market prices for oils, the primary raw materials, with the cost of edible oil alone escalating by 21.0%. Additionally, even as grain prices dipped, notable price hikes were observed in soup (20.4%), flour (17.8%), and bread (12.5%). This period also saw the overall consumer price index rising by 7.2%, with processed food prices surging nearly 1.5 times, further exacerbating the financial strain from food costs.

Amidst these developments, the domestic food industry faced scrutiny as numerous firms reported unprecedented operating profits last year. Professor Kang Sung-jin from Korea University's Economics Department remarked, "While processed food prices typically ascend with raw material and energy costs, they seldom decline in response to a drop in raw material prices, thereby imposing added financial pressures on households and the service sector during inflationary phases.

Addressing the issue, President Yoon Suk Yeol, at a conference held on Monday at NH Nonghyup Hanaro Mart's Yangjae branch in Seoul's Seocho District, emphasized the government's commitment to "swiftly enact special measures centered on agricultural goods to alleviate the cost pressures on consumers' daily expenses.”


Do-Hyong Kim dodo@donga.com