By Nam Hyun-woo
Shin Young-ja, 54, a housewife in Seoul, recently had a startling experience after ordering a 20 kilogram pack of rice from an online shopping mall because the price was far higher than what she remembers when she ordered a similar pack a year ago.
“What I remember is around 30,000 won ($27) last summer, since we don't eat that much rice these days, I didn't realize the price had changed so much in a year,” she said.
What she remembers is correct. The country's rice prices are rising steeply from that of last year, casting concerns not only for households but also the government, which appears to be wavering between farmers demand for the “normalization of the price of rice,” and a consumer prices hike expected in the second half of the year.
According to Statistics Korea, the wholesale price of rice was 44,263 won per 20 kilograms as of July 25, up 38 percent from a year earlier. The retail price also rose to 47,825 won per 20 kilograms as of July 10, up also 38 percent from a year earlier.
Traditionally, rice prices go down in summer as demand declines, but the recent price surge is at odds with the seasonal effect, industry officials said.
The rising rice prices have also affected the cooked rice market, with companies saying they have no option but to raise product prices.
According to CJ CheilJedang, it raised the prices of Hetbahn cooked rice and other food products using Hetbahn by an average 9 percent in March.
“Rice prices are the most critical factor in deciding Hetbahn prices,” an official at CJ CheilJedang said. “Though companies are attempting to withstand hikes in costs by not reflecting them right away, rice prices are rising steeper than estimated.”
The rising price is attributable to a decline in rice growing. Last year, Korea produced 3.97 million tons of rice, down 5.3 percent from 2016. This was the first time that the yearly rice crop dropped below 4 million tons in 37 years.
The decrease is related to the declining demand. Yearly per capita rice consumption plunged to 61.8 kilograms last year, almost halve that of 1988 when a Korean consumed 122.2 kilograms.
The low demand also brought a reduction in rice growing areas. These have been on a steady decline from 950,000 hectares in 2007 to 755,000 hectares in 2017.
Along with the long-term changes in dietary habits, short-term government policies are also to blame for the hike.
The government has been setting rice price targets and paying subsidies to farmers if the actual price falls below this _ last year, it paid out 1.49 trillion won. The current target is 47,000 won per 20 kilograms and is expected to be raised later this year.
To raise rice prices to the level of the target and to cut the subsidies, the government has decided to store 720,000 tons of rice after purchasing it at higher than the market price in October.
However, the price hike came sooner than expected, and the government released 84,000 tons of stored rice on the market in March, but to little effect.
While the rising rice prices are weighing on households, farmers are saying the prices are “normalizing,” adding that last year's price was close to that of 30 years ago.
Another concern for the government is the expected consumer prices hike in the second half.
Stemming from soaring oil prices, city gas has already gone up by 3.9 percent from two months ago and other public utility charges are expected to rise. Vegetables, livestock and fishery products prices are also anticipated to shoot up due to a heat wave baking the country.
“Given the rice price is expected to remain strong in the second half, the agriculture ministry will consider the release of more stored rice,” an official at the Ministry of Agriculture, Food and Rural Affairs said.