As food prices continue to soar, domestic food and dining prices are expected to keep rising next year. This is due to increasing prices for key ingredients like oils and the surge in the won-dollar exchange rate, leading to higher import costs.
According to the Ministry of Agriculture, Food and Rural Affairs on the 22nd, the World Food Price Index published by the United Nations Food and Agriculture Organization (FAO) reached 127.5 last month, marking its highest point in 19 months.
The index compares prices based on the 2014-2016 average set at 100. It fell to 117.4 last February but has increased by 8.6% over nine months.
Among major product categories, the price index for oils rose by 7.5% in just one month.
The price of palm oil rose due to expectations of reduced production in Southeast Asia, while the price of soybean oil increased with rising import demand from various countries. Prices for sunflower and rapeseed oils also surged amid concerns over reduced supply.
Additionally, prices for dairy products such as butter and cheese are on the rise due to increased demand across countries. Last month's dairy price index rose by 17.9% compared to January.
Cocoa and coffee, ingredients for chocolate, also saw significant price increases due to the impact of abnormal weather conditions.
According to the Korea Agro-Fisheries and Food Trade Corporation (aT), cocoa prices as of the 19th stood at $12,107 per ton (approximately 17.57 million won), up 41.4% from the previous month. This represents an increase of 183.2% compared to the beginning of the year.
Robusta coffee is priced at $5,046 per ton (approximately 7.32 million won), having become 8.4% more expensive than a month ago and 67.6% more expensive compared to the start of the year.
The food industry stockpiles raw materials for use, so the impact of these food ingredient price increases usually appears with a delay of three to six months. This means the current rise in raw material costs has not yet been fully reflected in the market.
In this situation, the won-dollar exchange rate recently exceeded 1,450 won. If the high exchange rate persists, import costs will rise, worsening the profitability of corporations.
Korea imports most of its food ingredients. With rising exchange rates, import prices go up, leading to increased production costs, which can result in price hikes.
In 2022, food and dining prices also rose as exchange rates soared along with raw material costs due to the impact of the Ukraine-Russia war.
The Korea Rural Economic Institute, through data submitted to Rep. Kim Hyun-jung of the Democratic Party of Korea, projected that price pressures would increase in the food industry, where materials and supplies account for 60-70% of production costs, and in the dining industry, where they account for 30-40%.
They further explained that the rise in import material costs due to the high exchange rate leads to increased production expenses, likely resulting in rising prices for processed food and dining out.