Pressure is building for feed and fertilizer prices to rise due to the fallout from the Middle East war. With exchange rates adding to the increase in materials and supplies prices, there are concerns that farm expense burdens will grow.
According to the Ministry of Agriculture, Food and Rural Affairs on the 5th, the average feed price by livestock type, such as for poultry and swine, rose 3%, from 597 won per kilogram in Nov. last year to 615 won in Feb. The main factor is analyzed to be higher import costs due to a stronger exchange rate.
Feed ingredient prices are also on an upward trend. According to the Korea Agro-Fisheries & Food Trade Corporation (aT), the price of soybean meal, a main feed ingredient, stood at $315.2 per ton as of the 2nd, up 8.3% from the start of the year. Corn also rose 3.4% to $4.52 per bushel (27.2 kilograms).
Because feed accounts for about half of livestock production costs, increases are likely to lead to higher livestock product prices. In fact, according to the Korea Institute for Animal Products Quality Evaluation, the price of premium Korean beef, known as hanwoo, tenderloin was 14,352 won per 100 grams as of the 2nd, up 21.8% from a year earlier.
◇ Fertilizer made from natural gas likely to bring higher prices from Aug.
Concerns about a blockade of the Strait of Hormuz, which accounts for about one-third of global maritime fertilizer transport, are also raising the possibility of fertilizer price increases. If fertilizer prices rise, farm management costs are expected to face heavier burdens.
Fertilizer is a representative chemical product that uses natural gas as a raw material, and when oil and gas prices rise, production expense increases as well. The natural gas futures price, a fertilizer feedstock, was 53 euros per megawatt-hour (MWh) last month, up 62.4% from the previous month and 126.4% from a year earlier. During the same period, the global nitrogen fertilizer index also surged 35.2% from the previous month and 168.6% year over year.
Accordingly, the Ministry of Agriculture, Food and Rural Affairs launched an inventory review with major fertilizer companies and NongHyup. Minister Song Mi-ryung visited Namhae Chemical, the country's largest fertilizer producer in Yeosu, South Jeolla Province, to check trends in fertilizer raw material supplies and production status.
Based on the ministry's review, stable fertilizer supply is expected through July. However, after Aug., price increases are seen as unavoidable as higher oil prices, exchange rates, and ocean freight are reflected. To ease the burden on farms, the ministry plans to expand the fertilizer price support program for inorganic fertilizers and increase funds for the industry's raw material purchases. It also plans to reduce excessive fertilizer use by farms.