FMD feared to stoke inflationary pressure

By Kim Tae-gyu

The foot-and-mouth disease (FMD) outbreak is feared to be generating inflationary pressures here as the highly-contagious epidemic has raged fiercely across the country of late to cause the destruction of many animals.

In particular, the prices of dairy products such as fresh milk, powdered milk, ice cream, butter and cheese might surge because a substantial number of cows have been culled.

According to the Ministry for Food, Agriculture, Forestry and Fisheries (MOFFAF), some 420,000 cows are raised here and so far around 4,000 of them have been killed to prevent the spread of FMD.

When FMD is detected or animals are vaccinated against the illness, all the milk produced within 3 kilometer radius is supposed to be disposed of under MOFFAF regulations.

The measures have prompted the reserve of powdered milk to drop to 5,000 tons at the moment from the country’s usual store of 6,000 tons.

``We have concerns that FMD may spread to southern Gyeonggi Province where 40 percent of Korean cows are bred. We need to prepare for the worst-case scenario,’’ a MOFAFF official said.

In this climate, industry observers point out that the reduced supply of milk may end up levying inflationary pressures on fresh milk or other dairy products.

Currently, three quarters of all milk produced in Asia’s fourth-largest economy is used for fresh milk products while the remaining 25 percent is used for other dairy items.

FMD affects cloven-hoofed animals, mostly domesticated ones including goats, cattle, pigs, deer and sheep. The current outbreak started in Andong, North Gyeongsang Province in late November and spread to Gyeonggi and Gangwon Province.

Other inflationary threats still linger such as crude oil prices and the cost of agricultural produce.

Crude oil prices jumped to beyond $90 per barrel last week for the first time in longer than two years and continue to remain strong. This is bad news for Koreans, which does not produce a drop of oil.

The Seoul administration issued a warning on the rising oil prices, which will jack up not only gasoline prices here but also various other petrochemical products.

The price of agricultural produce is also showing signs of rising.

Pulmuone, which accounts for around half of the tofu markets, recently raised the product’s prices by as much as 27 percent and runner-up player CJ is ready to follow suit.

They claim that the appreciation of the cost of beans have made them to raise prices.

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