Bird flu adding to inflation pressure

By Yoon Ja-young

The spread of the H5N6 avian influenza strain and related quarantine measures are pulling up consumer prices for eggs and other foods. With vegetable prices having already soared due to record heat and drought in summer, the recent hike is tightening household budgets and threatening small food businesses.

According to Bank of Korea, the producer price index stood at 99.9 in November, up 0.4 percent from the previous month. It has been rising for four consecutive months since August, to mark the highest level in 14 months.

Since producer price works as a leading indicator for consumer prices, analysts expect consumer prices to increase further soon. The consumer price index rose 1.3 percent in November.

The rising prices are expected to weigh on the livelihoods of working-class citizens who are already burdened by rising public fares and fresh food prices. Most recently, they were especially hit by egg prices. According to Korea Agro-Fisheries Trade Corp (aT), the consumer price for a package of 30 eggs averaged 6,605 won ($5.5) as of Monday, up 22.1 percent from the previous month.

Retail outlets such as E-mart, Homeplus and Lotte Mart have also raised egg prices two or three times since the bird flu outbreak while some supermarkets are limiting the number of eggs per shopper.

The soaring price is due to a supply shortage following quarantine measures. To contain the epidemic, the government is culling poultry within a certain radius once an outbreak is detected. According to the retailers, over 20 percent of hens raised for eggs have been culled so far. In the case of chickens raised for breeding, four out of 10 have been killed. When considering that it takes at least six months for chickens to mature enough to lay eggs, the shortage of eggs is likely to continue until next summer.

The egg shortage is likely to affect prices of other foods containing eggs. According to employees of some bakery shops, they have been assigned to bring eggs to work each morning due to shortages. According to Hyundai Research Institute, restaurants may lose 41.6 billion won if 20 percent of poultry is affected by the bird flu virus.

To cope with the shortage, the government is planning to import chickens and eggs, but the prices of fresh foods have already soared by around 15 percent over the past three months, with the prices of some vegetables such as radish and Chinese cabbage doubling.

Food and beverage businesses have also been raising product prices. Nongshim, the country’s top instant noodle producer, raised consumer prices by on average 5.5 percent while Paris Baguette, a bakery franchise operator, raised prices by 6.6 percent.