Spiking global agricultural product prices sparked by droughts in major farming nations are stoking fears over "agflation" in Korea as the country depends heavily on imports for its grain and other major produce needs, experts said Monday.
According to data provided by the Korea Center for International Finance, the price of corn futures at the Chicago Board of Trade (CBOT) stood at US$7.81 per bushel last Thursday, up 17.4 percent from $6.65 on July 29 last year. Wheat prices also jumped 31.5 percent over the same period.
The spike in the prices of corn and wheat, which are closely related to costs of a wide range of food products, stemmed mostly from reduced harvests in the United States following severe droughts in its major farming areas.
South Korea depends on imports for almost all of its corn and wheat, which is setting off fears over agflation, a phenomenon in which high food prices exert upward pressure on inflation.
The renewed agflation fears come as South Korea's food prices remain high despite the overall stabilization of consumer prices.
Food costs have been driven higher mostly by a prolonged drought in spring.
Local food prices rose 6.4 percent in May from a year earlier, the third-fastest growth among the member countries of the Organization for Economic Cooperation and Development. The OECD average was 2.6 percent for that month.
Experts say that things are different from the agflation that the world suffered in 2008 when spiking demand led to a rise in prices. At the time, a global financial meltdown helped dampen the sometimes speculative price movements of major agricultural products.
They worry that there are few factors this time that could ease price hikes of corn and wheat, among other things, as their prices are mostly driven by drought and other severe weather conditions, not by strong demand.
"There are many forecasts that the skyrocketing grain prices will last for a much longer time than 2008 when the world suffered agflation. We are concerned that such price hikes could continue well into next year," a government official said on condition of anonymity. (Yonhap)