Demand for Home-Cooked Meals Rises... Food Ingredient Prices Increasing One After Another

Emergency in grocery prices as social distancing raised to level 2
20kg rice up 6% in a month... sweet potatoes and potatoes also rising

Customers visiting a large supermarket in Seoul are browsing the vegetable section. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Seungjin Lee] As social distancing measures nationwide have been raised to Level 2, a warning has been issued regarding grocery prices. With gatherings and company dinners being restrained, demand for home-cooked meals is expected to increase, leading to a continuous rise in prices of major food ingredients.

According to the Korea Agro-Fisheries & Food Trade Corporation (aT) on the 23rd, the retail price of 20kg of rice was recorded at 59,738 KRW as of the 20th. This is about 6% higher compared to October, and a staggering 14% increase compared to a year ago (51,918 KRW). Last year, the highest price for 20kg of rice was in the 53,000 KRW range, but this year it is approaching 60,000 KRW, breaking record highs day after day.

Usually, rice prices peak in early October and gradually decrease as the autumn new rice harvest begins. However, this year, due to poor crop conditions, the harvest volume has declined, and the demand for home-cooked meals has increased amid the COVID-19 pandemic, leading to higher rice demand. As a result, even though the new rice harvest is in full swing, prices continue to rise.

The rise in rice prices is likely to affect not only instant rice products but also convenience store lunchbox prices. CJ CheilJedang raised the price of its 'Hetbahn (210g)' by 9% last year to reflect the increase in rice prices. Ottogi also increased the price of its instant rice product 'Ottogi Rice' by an average of 8% in September, the first increase in three years. Although the food industry states that "there are no plans to raise prices within the year," the continuous record-high rice prices make it impossible to rule out the possibility of price hikes.

The same applies to convenience store lunchboxes. For private brand (PB) lunchbox products, merchandise planners (MDs) are making efforts to stabilize prices by visiting various production areas nationwide and comparing different varieties. They plan to continue consultations with partner companies to find ways to minimize the extent of lunchbox price increases.

Prices of other major food ingredients besides rice are also on the rise. This is due to poor crop conditions caused by the longest rainy season on record this year, compounded by typhoon and cold damage. According to aT, as of the 20th, the price of sweet potatoes per kilogram was 5,730 KRW, a 30% increase compared to a year ago, maintaining an upward trend for the past month. Prices of potatoes, onions, and apples have also been rising for a month. For example, the price of onions per kilogram was 2,409 KRW on the 20th, nearly double the 1,348 KRW from a year ago.

As pork prices, which had surged sharply in the first half of the year, have stabilized, concerns have shifted to rising prices of chicken and eggs due to avian influenza (AI).

Recently, the spread of AI has noticeably increased in neighboring countries such as China and Japan, raising the possibility of domestic inflow. Although there have been no cases of highly pathogenic AI in domestic farms yet, five cases have been reported in wild birds, putting poultry farms on alert. When AI struck domestic poultry farms in 2016, chicken prices soared by more than 30%. As of the 20th, the price of chicken per kilogram was 5,342 KRW, 10% higher than last year, and if AI spreads further, food prices at the table are expected to rise rapidly.

In response to this situation, the distribution industry, centered on large supermarkets, has taken measures to stabilize prices. A distribution industry official explained, "We are responding by sourcing various production areas to minimize price fluctuations due to supply conditions and by directly contracting with farms to minimize distribution costs."