Recently, the rate of increase in rice prices has surpassed 13% compared to the average year. This is due to a shortage caused by a decrease in rice production last year. The food and beverage industry, which consumes a large amount of rice, is closely monitoring the situation as the rise in rice prices has continued since March. While it is difficult to immediately reflect the increase in costs in product prices due to persistent high inflation, there are concerns that continued increases in rice prices could lead to product price hikes.
According to the Agricultural Products Distribution Information (KAMIS) on the 2nd, the retail price of 20 kg of rice was 59,088 won as of the previous day. This figure represents increases of 10.30% compared to the previous year and 13.62% compared to the average year.
Rice prices have been on the rise since March. As of February, the price of rice was 54,438 won, which was down 2.5% from the previous year, but in March, it rose to 55,237 won, an increase of 4.5%. In April, the price was 54,831 won, up 7.9% from the previous year. Since May 23, the price of rice has continued to rise, exceeding 59,000 won.
This is a result of decreased rice production due to last year's extreme heat. According to the recently released 'June rice price outlook showing steady trends' from the Korea Rural Economic Institute (KREI), the rice procurement volume of distribution companies in the producing areas was 85,000 tons (t) from March to April. This is an increase of 5,000 tons compared to the previous year. Subsequently, the volume circulated in the market has decreased.
The inventory held by distribution companies in the producing areas is also relatively low compared to previous years. As of the end of April, the total rice inventory was 712,000 tons, a decrease of 210,000 tons from the previous year. Mr. A, a representative of a rice production and distribution company, said, "Last year, the heat was so intense that a lot of empty grains resulted, ultimately leading to a shortage of rice, forcing us to look for rice from various producing areas such as Hampyeong, Mokpo, Yeongam, and Naju," adding, "If this situation continues, even the lowest grade of rice will exceed 50,000 won for 20 kg."
Traditional liquor manufacturers, who use rice as their main ingredient, are paying close attention to the trends in rice prices. An industry representative noted, "The fluctuations in the amount and price of rice allocated by the rice processing association are key factors," adding, "While the immediate impact of cost burdens being reflected in product selling prices is low, we will monitor the effects of any increases."
Another representative in the traditional liquor industry said, "About 6 to 7 years ago, there was a significant increase in rice prices that led to a price increase for products. It is hard to consider the current situation as nothing serious," adding, "Increasing product prices should be a last resort, so it must be carefully examined."
The instant rice and school meal sectors are also watching the trends in rice prices. The price of rice from Jeongeup, which is known to be most commonly supplied to school meal companies, has increased to around 50,000 won, increasing the cost burden.
Mr. B, who supplies rice to instant rice production companies, stated, "In the current context of rising rice prices, we have no choice but to raise supply prices. We coordinated with the instant rice manufacturers to increase the supply price by about 2,000 won based on 20 kg of rice," adding, "This decision was unavoidable due to the cost burden." A school meal industry representative remarked, "It is true that the burden of material costs has increased due to rising rice prices," noting, "We are concerned about the deterioration of revenue."
However, most corporations are receiving agricultural products through annual contracts with producers, so the immediate impact of rising rice prices is not expected to be significant, according to the industry's perspective. The ongoing high inflation also heightens the burden of price increases.
Experts advise that as rice prices continue to rise, measures should be prepared while monitoring the situation. Professor Kim Han-ho from Seoul National University's Department of Agricultural Economics noted, "The key question is how long rice prices will continue to rise," adding, "If rice prices keep rising until October before Chuseok, it is expected that the government will take measures such as releasing stockpiled rice. The industry also needs to think carefully about countermeasures while monitoring the situation."
Professor Lee Jong-woo from Ajou University's Department of Business Administration stated, "When rice prices rise, it benefits household income for farmers. It is a time for consumers, producers, and intermediate distribution and manufacturing companies to consider an appropriate equilibrium price," adding that it means we should consider increasing or maintaining product selling prices while closely watching the trend of rice price increases.