Global sugar price hike prompts concerns over domino effect in Korea

By Yi Whan-woo

Global sugar prices are increasing sharply, prompting speculation that the cost of bread, ice cream, confectionary, soda and other sugar-based food and beverages in Korea will continue to go up due to the lingering effects of inflation.

The hike in the price of sugar abroad is also causing upward pressure on the cost of dining out in the midst of a slowdown in inflation, which eased to 4.2 percent in March, as many restaurants use high amounts of sugar in their dishes.

“Upward pressure on costs of processed food and dining out poses a challenge to a downward trend on inflation, and in that regard, we should pay attention to global sugar prices,” a Korea Institute for Industrial Economics and Trade (KIET) researcher, said on condition of anonymity.

The researcher was referring to international sugar prices that ticked up 24 cents per pound and reached an 11-year-high in recent days, due to unseasonal rains in Brazil and downward crop revisions in India.

Brazil and India are the world's two largest sugar producers.

In the short term, sugar importers and their clients in Korea do not find the global spike in sugar price, worrisome because they secured their supply when the price was much lower ― at the beginning of the year.

“But in the long term, they will run out of a supply and the country may struggle with 'sugarinflation' unless it takes relevant measures to secure more supplies at a reasonable price,” the KIET researcher said.

Also asking not to be named, an LG Economic Research Institute economist said that the recent slowdown in inflation here can be adversely affected by the price hike in sugar.

A 4.2 percent year-on-year growth in consumer prices in March was the lowest level marked in a year, after inflation rose to 6.3 percent in July 2022.

In contrast, costs of processed food and dining out combined were the second biggest factor for persistent inflationary pressure after utility fee costs.

The prices of processed food jumped to a near 14-high of 10.4 percent in March, while those of dining out increased by 7.5 percent.

“There is a slim chance that the cost of eating out will fall, as more people want to go out in the post-pandemic era,” the LG economist said.

Industry sources speculated CJ CheilJedang, TS Corp., Samyang Corp. and other major domestic sugar suppliers may increase the wholesale price of sugar by the end of this year if price hikes continue across the world.

Of the processed foods, the price of cheese moved up 34.9 percent in March, while that of bread ticked up 22.3 percent, snacks by 14.2 percent and ice cream by 13.6 percent, during the same time period.