Food price growth expected to stay above 5% for 3rd year in row

Shoppers look at grocery products at a supermarket in Seoul, Nov. 2. Yonhap

Prices of major grocery items have risen more than 5 percent for the first 10 months of this year amid a surge in global prices of oil and crops, and this trend is likely to continue throughout the remainder of 2023, according to data, Sunday.

If the surge continues, it will be the first time in more than a decade that price increases of vegetables, fruit, meat, milk and other staples have remained above 5 percent for three years straight.

Against this backdrop, the government decided to launch a task force as soon as possible to keep volatile food prices under control and reduce the negative impact on the public's livelihood.

The Ministry of Agriculture, Food and Rural Affairs said a senior ministry official will be appointed to oversee the price of seven food items – ramen, bread, cookies, coffee, ice cream, sugar and milk.

Analysts said the hike in the prices of staple food products is especially worrisome for lower-income households that are hit hardest by surging consumer prices. Infation cooled down to a 25-month low of 2.3 percent in July, but rose for three straight months thereafter – 3.4 percent in August, 3.7 percent in September and 3.8 percent in October.

“The high cost of living hits poorer households disproportionately, and the case will be more severe when it comes to staples and other sought-after items,” said Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute (KERI).

He noted that prices of staple items went up 5.1 percent year-on-year from January to October, according to data released by the Korean Statistical Information Service (KOSIS), a website run by Statistics Korea.

The hike is attributable to the surge in global prices of energy, crops and raw materials, coupled with more extreme weather.

“These obstacles are unlikely to go away by the end of the year,” Lee said, suggesting the yearly price increases of staple foods are likely to be above 5 percent for 2023, after rising 5.9 percent in 2021 and 2022.

The last time food prices grew for three straight years was from 2009 to 2011.

Among vegetables, the price of ginger marked the steepest year-on-year increase of 97 percent in the January-October period, followed by carrots at 33.8 percent and onions at 21.5 percent.

During the cited period, the price of oranges went up 18.3 percent, while that of apples ticked up 17.2 percent.

The price of milk climbed 14.3 percent to reach the highest level since August 2009 when the country was coping with the aftermath of the global financial crisis. The price of milk surged 20.8 percent year-on-year at that time.

The surge in the price of milk correspondingly pushed up prices of dairy products across the board, including fermented milk, up by more than 14.7 percent, an 18-year high. The price of ice cream also went up 15.2 percent, a 14-year high.

To add to the public's mounting financial woes, the cost of eating out increased 6.4 percent year-on-year. For instance, the price of pizza went up 11.5 percent, while that of hamburgers increased 9.6 percent and gimbap rose 8.9 percent.

Under the circumstances, the KOSIS data showed households in the bottom 20 percent of the income bracket spent 258,000 won or 29.4 percent of their monthly disposable income on average on staples. Disposable income refers to the money available for consumption after paying income taxes.

The rate of such expenditures went up to 44.4 percent when the cost of eating out was included.

“The fact that approximately half of the money available for actual spending was spent on food suggests how tough it is for low-income earners to make a living,” the KERI researcher said.

To minimize the negative impact on the public's day-to-day lives, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho announced last week he will “bring all relevant ministries together to prioritize stabilizing prices.”