Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Heat wave drives up food prices, causing 'heatflation'
A farmer, covering her head with sheets of newspaper to shield from sunlight, harvests green onions amid scorching heat in a field in Goryeong County, North Gyeongsang Province, Thursday. Yonhap
By Lee Yeon-woo
By Lee Yeon-woo
The abnormal heat wave baking the country is causing nationwide disruptions in food production, leading to surging prices. Market watchers believe that such a situation could push the country toward inflation once again.
According to the Korea Agro-Fisheries & Food Trade Corp., Sunday, the price of 10 kilograms of cabbage surged by 118.4 percent compared to a month ago, reaching 20,240 won ($15.47). Those of other vegetables that Koreans usually consume, such as radishes and green onions, have also increased respectively by 128.7 percent and 56.7 percent compared to last month.
The high temperatures, coupled with heavy rain during the monsoon season, are believed to have caused food supplies to decline significantly. The Bank of Korea forecasts that the rate of increase in vegetable prices could go even higher.
The agriculture industry is not the only sector experiencing struggles. As of Friday, deaths of 10,039 pigs and 226,670 chickens were reported nationwide due to the sweltering heat. Operators of fish farms are also on alert, as significant numbers of fish are likely to die from a lack of oxygen caused by high water temperatures.
Such a situation is highly likely to cause “heatflation,” a term coined to explain unusually hot temperatures leading to a rise in food prices.
According to a report by Hyundai Research Institute, the second half of years that experience intense heat waves see an increase of approximately 0.2 percentage points of inflation compared to the first half.
Cows are sprayed with cool mist to help them cool off from the heat at a cattle farm in Busan, Friday. Yonhap
The rise in consumer prices could hamper the government's economic initiatives, which aim to boost economic growth in the second half of the year after focusing on stabilizing consumer prices in the first half.
From the end of July to the end of August, the government has planned to inject approximately 10 billion won to stabilize soaring prices in agro and livestock products.
The Korean economy is also anticipated to be affected significantly by heat waves in the long run. The United Nations University International Institute for Global Health expects Korea's gross domestic product (GDP) to lose $1 billion every year due to the climate crisis, starting in 2030.
Roh Si-yeon, a senior researcher at Hyundai Research Institute, further urged the government to prepare for the future, as such weather anomalies are expected to become the new normal.
“Given the high possibility that the heat wave might accelerate inflation for items closely related to the people's livelihoods, more diversified support plans should be considered to prevent further polarization, along with consumption support measures,” Roh said. “For the agriculture, livestock farming and fishing industries, it's essential to enhance supply and forecasting capabilities by building big data on production, distribution and consumption.”