August 16, 2012
South Korea is anticipated to experience one of the most severe inflation due to an upsurge in grain prices.
Concerns over agflation or inflation due to an upsurge in grain prices, emerged last month due to severe droughts experienced by such major grain exporters as the US and Russia. The Korean government is on track to formulate countermeasures against agflation, which is expected to exert negative influences on Korea's consumer prices.
Grain prices in Korea will start climbing at the year-end of 2012, considering that shifts in supplies of import grains affect Korea's grain prices about four to seven months later, forecasted the Korea Rural Economic Institute (KREI) Wednesday (Aug 15).
By the end of this year, prices of wheat and corn powder will jump 27.5% and 13.9%, each, from the second quarter this year and prices of vegetable oil and livestock feeds will ascend 10.6% and 8.8%, respectively, the KREI projected.
As grain prices continue to surge, speculative capital flowed into the international grain market, pushing up grain prices even further.
Korea is particularly vulnerable to fluctuations in international grain prices because it depends highly on imports for its grain demand.
Korea's rate of food self-sufficiency topped out at 26.7% as of 2010. Except for rice (104.6%), Korea is rarely self-sufficient in its demand of wheat (0.8%), corns (0.8%), and soy (8.7%).
As Korea is expected to be hit hard by soaring grain prices, the local government is gaining speed in preparing countermeasures. In order to prepare for the continued growth in grain prices, the government is mulling over extending its 'no duties policy' on wheat, soy and extending its grain purchases for public storage system to wheat, soy, corns as well as rice. Furthermore, the government requested grain-related businesses to refrain from hiking prices.
"The government is closely monitoring movements in international grain prices. It will implement diverse countermeasures to minimise negative effects of surging grain prices to Korea's consumer prices," said a Ministry for Food, Agriculture, Forestry and Fisheries (MIFAFF) official.
