[The Editors' Verdict] Lessons from the Soaring Price of Apples

Abnormal Weather Driving Apple Wholesale Prices
Accompanied by Distribution Structure Improvement and Climate Change Measures

Abnormal temperatures and poor crop yields.

These are the reasons behind the soaring apple prices that have been on a high since last year. Due to abnormal high temperatures in spring when apple blossoms bloom, the flowers bloomed early but were killed by a cold snap, preventing fruit formation. Additionally, adverse factors such as concentrated heavy rains and pests during summer overlapped, causing apple production to decrease by 30%. According to the Korea Agro-Fisheries & Food Trade Corporation (aT), the average retail price of apples (for general consumption (medium grade) · 10 pieces) this month is 23,208 won, which is 11.58% higher than the previous month. Last month, when the 22nd National Assembly general election was held, the government poured about 150 billion won in subsidies to stabilize prices and soothe public discontent caused by high inflation, temporarily lowering apple prices. However, prices have surged again this month.

The sharp rise in apple prices this year is not unprecedented. Agricultural products, which are highly affected by weather, have experienced price fluctuations whenever abnormal temperatures occur. In 2021, the average retail price of apples in May was 25,502 won, higher than this year. In 2020, when cold damage occurred for three consecutive years due to abnormal low temperatures, apple production decreased by 22% compared to the previous year, causing prices to rise.

What is noteworthy is the wholesale intermediary sales price of apples. When apples are handed over from farms to fruit companies (wholesale market corporations), they go through auctions and are purchased by intermediaries who then sell them to small business owners or consumers. This year, the wholesale intermediary sales price of apples (10 kg) is 83,634 won, which is 44.76% higher than in 2021 (57,774 won). Although retail prices were higher in 2021, the intermediary prices have risen much more sharply this year.

Because of this, the complex distribution structure has been pointed out as the main culprit for the sharp rise in apple prices. The government also formed the “Inter-Ministerial Task Force for Agricultural and Fishery Products Distribution Structure Improvement” last month and announced improvement plans earlier this month. The plans include promoting competition in wholesale markets, which tend to be monopolistic, and fostering online wholesale markets. With the ongoing high inflation centered on agricultural and fishery products, the government aims to reduce distribution costs by more than 10% through these distribution structure improvements.

Will changing the complex distribution structure control apple prices? Last year, the government also proposed improvement plans focusing on strengthening the public nature of wholesale corporations and evaluating and improving the market wholesaler system. However, over the past year, prices of agricultural and fishery products, led by apples, have soared further, and similar measures have been criticized as “rehashed policies.”

The background for the sharp rise in wholesale intermediary sales prices of apples this year appears to reflect climate crisis concerns. Apples, whose production decreased due to abnormal temperatures last year, are unlikely to see price reductions until the harvest this fall. Moreover, if poor crop yields continue this year due to bad weather, apple prices could skyrocket even further. Since the beginning of the year, abnormal high temperatures have occurred, and unprecedented heatwaves and heavy rains have been forecasted. This is likely why stored apples have not been released during the distribution stage.

There is a new term called “climateflation,” referring to price increases caused by global warming. It is a portmanteau of climate and inflation introduced by the BBC last year while covering soaring food prices. Food inflation caused by climate change is observed not only in Korean apples but also worldwide. In West Africa, a cocoa-producing region, continuous heavy rains and heatwaves have caused cocoa futures prices, the raw material for chocolate, to triple in one year. Coffee bean prices are also rising due to reduced production caused by droughts in Vietnam and Indonesia, the largest coffee producers. To stabilize food prices, climate measures such as developing crop varieties adapted to climate change must accompany distribution structure improvements.