[Report] "We're Bound to Lose Money" Market Vendors Distressed by Soaring Food Ingredient Prices

Russia-Ukraine War Causes Global Grain Price Surge
Market Vendors Using Flour and Cooking Oil Also Burdened
Domestic Food Self-Sufficiency Rate Only in 19% Range
Significantly Affected by International Prices

On the 8th, merchants are preparing for business at a traditional market in the metropolitan area. / Photo by Im Ju-hyeong skepped@

[Asia Economy Reporter Lim Juhyung] "The prices of flour and cooking oil have risen so much that it's breaking my back," "We can't raise prices, but we also can't sell at a loss... it's frustrating."

Since the Russia-Ukraine war, global food prices have skyrocketed, casting a shadow over the everyday economy. If the production of crops like wheat, corn, and soybeans decreases, not only wheat-based foods but also various ingredients such as cooking oil will inevitably see price increases. Market vendors are already feeling the pressure of a 'table price surge' and have voiced their concerns.

On the 8th, Mr. A, in his 60s, who runs a side dish shop in a traditional market in Gyeonggi Province, sighed, saying he can't even sleep worrying about ingredient prices. He said, "Vegetables, garlic, and red pepper powder are ingredients whose prices naturally fluctuate depending on the season, so I usually don't get surprised," adding, "But this year, prices have repeatedly surged, to the point that it's breaking my back."

B businesses such as bakeries and snack shops that use grain-processed products as ingredients raised their voices, saying they have already reached their limits. Mr. B, in his 40s, who runs a bakery near the market, said, "Flour is as precious as gold. Flour is the most important ingredient for making bread, but when prices jump 10% or 20% at a time, there's no solution," adding, "Large chain stores can buy ingredients in bulk from headquarters at once, so their situation is somewhat better, but small business owners like us find it hard to endure even small price fluctuations."

Mr. C (57), who has been selling fried snacks like twisted doughnuts and croquettes in the market for over 10 years, said, "It's not just flour; oil, sugar, and basically everything used in cooking seems to be rising," expressing frustration, "I've worked in the market for quite a long time, but I've never experienced such hardship as now."

Prices of major ingredients such as flour and cooking oil used in bakeries and snack bars have risen by about 10 to 20%. The photo is unrelated to specific expressions in the article. / Photo by Im Ju-hyung skepped@

According to the consumer price trend data released by Statistics Korea on the 5th, the domestic dining-out price index rose 6.6% compared to the previous year. This is the largest increase since April 1998 (7.0%), right after the foreign exchange crisis. Most ingredients used in the food service industry recorded double-digit increases. Cooking oil rose 21.6%, soy sauce 18.6%, and flour prices also increased by 14.3%.

According to the grain self-sufficiency rate data from the United Nations Food and Agriculture Organization, South Korea's food self-sufficiency rate was 19.3% as of 2020. In other words, South Korea must import grains from overseas according to international market prices to ensure a smooth food supply.

However, since the Russian military invaded Ukraine on the 24th of last month (local time), global grain prices have surged significantly. The blockade of the Black Sea ports of Ukraine, a major grain-producing country known as the 'breadbasket of Europe,' has destabilized the food supply chain.

According to the 'International Grain April Report' released on the 7th by the Agricultural Outlook Center under the Korea Rural Economic Institute, the grain import unit price index recorded 158.5 for food use and 163.1 for feed use. This index quantifies major grain prices, setting 2015 prices as 100. In other words, compared to seven years ago, current grain prices have risen by at least 50%.

If international grain prices continue to stay high, prices of ingredients such as flour and cooking oil will inevitably surge in the coming months.

Citizens also voiced their struggles with the steep price increases. Mrs. Jung, a housewife in her 50s who usually buys side dishes at traditional markets, said, "I can really feel the price increases from meat to vegetables. Even with just a few ingredients, I end up spending 40,000 to 50,000 won quickly," adding, "In the past, I chose higher-quality ingredients even if it cost a bit more, but now I only look for large quantities at low prices."

Grains cultivated at the Gyeonggi-do Agricultural Research and Extension Services in Hwaseong-si, Gyeonggi-do. / Photo by Hyunmin Kim kimhyun81@

Mr. Kim, a 30-something office worker living alone, said, "The side dish shop I often used raised prices by 500 to 1,000 won," adding, "I understand because prices are so high these days, but even the traditional markets I used to visit for cheap prices are gradually getting more expensive, making life tougher."

The current government and the Presidential Transition Committee are making every effort to ease the worsening price crisis expected in the future.

Earlier, on the 5th, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, announced at a price-related ministers' meeting held at the Government Complex Sejong that measures to lower the perceived price level would be implemented. This includes plans to expand the fuel tax reduction by 30% to alleviate the burden of high oil prices.

The Transition Committee has called on the current government to implement stronger price stabilization measures.

On the 7th briefing, Choo Kyung-ho, a member of the Transition Committee's Planning and Coordination Subcommittee and a People Power Party lawmaker, said, "Prices are rising sharply, and difficulties are appearing across the economy due to rising raw material prices. The Moon Jae-in administration is working hard to wrap up various pending issues within a month, so we urged the government to recognize these problems," adding, "The Transition Committee will separately respond while consulting experts, as this situation is likely to continue."

Additionally, on the 6th, the Transition Committee held a meeting with grain import and distribution companies and officials from the Ministry of Agriculture, Food and Rural Affairs to assess domestic grain stocks and the status of domestic food crop reserves.