Prosecutors are investigating alleged collusion over flour prices in the food industry. The Fair Trade Investigation Department of the Seoul Central District Prosecutors' Office conducted raids on the headquarters of CJ CheilJedang, Daehan Flour Mills, and SAJODONGAONE on the 11th. It follows a tough investigation into sugar price collusion. The food industry interprets the move as a response to President Lee Jae-myung's remarks at a Cabinet meeting in Oct., where he identified collusion and monopolies in the food industry as causes of high inflation and called for a strong response.
Corporations are keeping silent for now about the causes of rising wheat prices. With sugar price collusion uncovered, it is also true there is little more to say. But there is cautious talk that the fundamental cause was the failure to foster the domestic wheat industry. The point is that the government is going after corporations on the grounds of inflation while failing to do what it should.
According to related industries on the 16th, the consensus is that the Ministry of Agriculture, Food and Rural Affairs' First Basic Plan to Foster the Wheat Industry, established in 2020, has effectively failed. The plan aimed to raise the wheat self-sufficiency rate to 5% by 2025 and increase production to 120,000 tons, but the self-sufficiency rate remains in the 1% range in both 2020 and 2025.
As of 2023, annual per capita wheat consumption is about 38 kilograms, making it the most consumed grain after rice (56.4 kilograms). But Korea relies on imports for nearly 98% of its wheat. Naturally, prices are at the mercy of international wheat prices and the won's exchange rate against the U.S. dollar.
A source in the food industry said, "Even if imported wheat prices fall, if the won weakens against the U.S. dollar, the cost of purchasing wheat will naturally rise." Recently, the won-dollar exchange rate has been in the 1,470-won range, higher than the 1998 annual average (1,394.97 won) during the International Monetary Fund (IMF) currency crisis.
The problem is that if time is simply allowed to pass like this, raising the wheat self-sufficiency rate will remain a distant prospect. The government plans to raise the rate to around 10% from 2026 to 2030, but it has yet to find solutions in any area, including production, processing, and distribution.
For example, on the production side, farmers need to be encouraged to grow the crop and an incentive system must be designed for that purpose, but the planned stockpile of domestic wheat for next year has actually been reduced. The Agriculture Ministry said it plans to stockpile 20,000 tons of domestic wheat next year, a 13% decrease from this year's 23,000 tons.
The processing sector is in a similar situation. The government's plan to build dedicated wheat blending facilities to mix various flours and achieve desired taste, texture, and quality also remains a distant goal. The reason is the failure to secure a construction budget.
The distribution sector is somewhat better, thanks to the participation of corporations. This means corporations are handling efforts to promote domestic wheat. Notably, SPC Group has contributed to raising the self-sufficiency rate by using domestic wheat across brands such as Paris Baguette and Samlip, starting with the acquisition of "Mildawon" in 2008 and launching products including bakery items, hotteok, and manju (wagashi).
Efforts to make bread, baguettes, and croissants with domestic wheat are also continuing thanks to corporations. A representative example is the Le Pain Championship, held at COEX in Seoul in Nov. The Le Pain Championship is the nation's largest baking competition, supported by the French Embassy and the French Bakers' Confederation.
The overall director of the competition is Chef Lim Tae-eon of the bakery foodtech corporation Le Pain. Lim said, "To showcase the appeal of Korean wheat and open new possibilities, we planned a domestic-wheat bakery division this year and will open a pop-up store in France next year."
A food industry source who requested anonymity said, "Corporations are working to promote domestic wheat, and it is true we want to speak up to a government that takes such efforts for granted and tries to confine wheat price increases to a corporate problem." The person added, "But the timing is not good, so we cannot speak out openly."
Was the cause of breadflation—rising bread prices—and wheat price volatility really just corporate collusion? To properly solve the problem, a more multifaceted analysis seems necessary.