Soybean Oil Prices Hit Highest in 10 Years... Chicken Shops Struggle More When Small-Scale

Photo by Asia Economy DB

[Asia Economy Reporter Moon Hyewon] "We have enough cooking oil stock to last at most a month. If the price goes up any further, it will be overwhelming."

On the afternoon of the 9th, Kim (50, male), who runs an old-style fried chicken restaurant in Yeonsinnae, Eunpyeong-gu, Seoul, expressed his frustration while frying chicken. Kim said, "The monthly cost of cooking oil has increased by more than 500,000 won compared to previous years," adding, "The raw material prices have skyrocketed so much that even selling fried chicken leaves no profit, making it difficult."

The soaring cooking oil prices are deepening the worries of self-employed people selling fried foods such as chicken. They are considering raising product prices as an alternative to the burden of raw material costs, but are hesitant to do so. If they raise prices and consumers turn away, it could even threaten their livelihood.

International cooking oil prices have been continuously rising since the beginning of this year. According to a report by The Wall Street Journal (WSJ) on the 6th of this month (local time), soybean oil futures on the Chicago Mercantile Exchange were traded at about 72 cents per pound (454g) on the 4th of the same month. This is three times higher than in March last year (24 cents per pound). It is the highest price since 2008. This is the result of supply being drastically insufficient compared to demand. Due to adverse weather in major soybean-producing regions such as the United States and Brazil last year, production decreased, causing a sharp decline in inventory this year.

Along with the rise in soybean prices, the price of 18ℓ cooking oil used in general restaurants is also soaring. According to the price comparison site Enuri.com, the market distribution price of CJ CheilJedang’s 18ℓ commercial soybean cooking oil, the top domestic cooking oil brand, jumped from 26,890 won on January 10th this year to 39,660 won on the 11th of this month.

The chicken industry is where cooking oil prices have a significant impact on product pricing. Large franchises such as Kyochon, BBQ, and bhc are in a relatively better situation. Chicken franchises can purchase cooking oil at prices lower than the current market price due to the headquarters’ raw material purchasing power. A chicken franchise official explained, "Even though the price of cooking oil for chicken is at an all-time high, we have already secured the quantity needed until the end of this year," adding, "There is pressure to raise prices, but since consumer resistance is expected to be strong, there are no plans to increase prices for the time being."

The problem lies with new brands and small self-employed operators. Since the price of broiler chickens has not returned to previous levels after the culling caused by the spread of highly pathogenic avian influenza (AI) earlier this year, and with the rise in oil prices, the proportion of raw material costs has increased by more than 30% compared to last year. According to the Korea Agro-Fisheries & Food Trade Corporation (aT), as of the 9th, the average price of chicken (1kg) was 5,335 won, up 7% from a year ago (4,960 won). Lee (46), who runs a chicken store in Mapo-gu, Seoul, said, "After deducting raw material costs, labor costs, and monthly rent, honestly, there is nothing left," adding, "Even though chicken prices are on average 20% cheaper than franchises, with other prices rising these days, it is difficult to consider raising prices."