Rising Import Raw Material Costs
Increase Pressure on Processed Food and Dining-Out Prices
Due to the prolonged period of high exchange rates, import prices have surged across the board. As fluctuations in international market prices have coincided with the rise of the won-dollar exchange rate, the won-converted prices of major imported food products such as coffee and beef have increased significantly over the past five years. Import prices are reflected in consumer prices with a time lag.
According to the Economic Statistics System (ECOS) of the Bank of Korea on December 21, the coffee import price index, with 2020 set at 100, recorded 307.12 in US dollar terms and 379.71 in won terms last month.
On the 3rd, as the morning temperature in Seoul dropped to minus 7 degrees Celsius bringing severe cold, a citizen is holding a warm coffee at Gwanghwamun Intersection in Jongno-gu, Seoul. Yonhap News Agency. Not directly related to the article.
Due to a sharp rise in international coffee prices, the import price per unit in US dollars has tripled over the past five years. On top of this, the increase in the exchange rate has pushed the import price in won terms to nearly four times higher during the same period.
Beef import prices have also risen by 30% in US dollar terms over the same period, but by 60.6% in won terms. Pork (30.5%), chicken (92.8%), cheese (about 90%), and fruit (30.5%) have also seen significant increases in won-converted import prices.
Products that are mostly dependent on imports, such as soybeans (37.2%), corn (35.3%), and wheat (22.1%), also saw increases of over 20% in won terms. Whiskey rose by 31.5% and wine by 20%, respectively. The price of juice concentrate soared by 120.2%. Frozen vegetables increased by 82.8%, and processed nuts by 61.6%. Raw sugar, used as a material for sugar, also posted a high increase rate of 51.7%.
Narrowing the period to just the past year, import prices in US dollar terms have declined, but when converted to won, items such as corn, fruit, coffee, fish products, and juice concentrate have actually increased. Coffee, for instance, fell by 1% in US dollar terms compared to a year ago, but rose by 3.6% in won terms. The import price of fruit dropped by 2.8% in US dollar terms over the year, but increased by 1.8% when converted to won.
By usage, the import price of intermediate food products rose by 50.6% in US dollar terms over the past five years, while in won terms it increased by 86.2%. Raw material agricultural, forestry, and fishery products increased by 21.1% in US dollar terms, but by 49.7% in won terms. In particular, the increase rates for agricultural products (62.4%) and livestock products (50.8%) were notable.
Meanwhile, since September, the won-dollar exchange rate has remained above 1,400 won per dollar. As Korean individuals and pension funds have dramatically increased overseas investment, and with foreign investors selling off large volumes of stocks in the Korean market in November, the high exchange rate has intensified despite repeated government measures. Analysts point out that the high exchange rate is pushing up the prices of imported raw materials, thereby increasing the burden of processed food and dining-out prices as well.
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