As military clashes among the United States, Israel, and Iran show signs of spreading across the Middle East, international oil prices and the won-dollar exchange rate are destabilizing at the same time. In the food industry, there is talk that the recent momentum of price cuts formed after government pressure could be broken by the Middle East risk.
According to related industries on the 5th, logistics costs are increasingly likely to rise as international oil prices have surged following the Middle East crisis. In particular, with the possibility of a complete closure of the Strait of Hormuz, a key chokepoint for global crude shipments, being mentioned, maritime freight rates and the like are under upward pressure. As of the 3rd (local time), the settlement price of Brent crude futures on the ICE Futures Exchange rose $3.66 (4.71%) from the previous session to $81.4 per Barrel. On the New York Mercantile Exchange, West Texas Intermediate (WTI) finished trading at $74.56 per Barrel, up $3.33 (4.67%).
The milling industry relies on imports because Korea's wheat self-sufficiency rate is only around 1%. It is directly affected by international oil prices and logistics costs. It is cited as a sector with high cost volatility due to a structure in which oil prices, freight rates, and exchange rates are reflected in prices simultaneously.
The milling industry's burden has grown as external variables pile on at a time when the possibility of deteriorating profitability had increased after recent collusion probes and price-cut pressure from the Korea Fair Trade Commission (FTC). The Korea Fair Trade Commission (FTC) is under investigation into seven domestic millers, including CJ CheilJedang and Daehan Flour Mills, on allegations of colluding on flour prices. Earlier, the Korea Fair Trade Commission (FTC) imposed a penalty surcharge of a provisional 408.3 billion won on three sugar makers—CJ CheilJedang, Samyang Corporation, and TS Corporation—saying they colluded on sugar sales prices for about four years from Feb. 2021 to Apr. 2025.
Major domestic sugar and milling companies such as CJ CheilJedang and Samyang Corporation cut flour and sugar prices by an average of 5% after the Korea Fair Trade Commission (FTC)'s collusion probe. CJ CheilJedang then said it would further cut the prices of flour products by an average of 5%.
Some bakery chains and others in the baking industry also plan to lower prices. Tous les Jours, operated by CJ Foodville, will cut supply prices for a total of 17 items, including bread and cakes, by an average of 8.2% starting on the 12th. Paris Baguette will also lower prices for 11 items, including bread and cakes, starting on the 13th. An industry official said, "There is still no issue with flour supply due to the Middle East situation," adding, "However, if the situation is prolonged, there could be hits from oil prices, logistics costs, and exchange rates, so we are keeping a close watch."
The food industry had been considering price adjustments after cutting flour prices under government pressure, but if oil prices and exchange rates continue to rise, cost burdens are expected to grow again. The Korea Fair Trade Commission (FTC) recently convened key franchise officials, including from chicken chains, and held an event to sign an agreement on advance notice of price hikes. The Ministry of Agriculture, Food and Rural Affairs summoned food companies the previous day, including CJ CheilJedang, Sajo Daerim, Ottogi, Daesang, Dongwon F&B, and Lotte Wellfood. On this day, it will summon four ramen companies—Nongshim, Ottogi, Samyang Foods, and Paldo Co. The ministry is said to be asking them to join the government's price-stability stance.
An official at a food company said, "With greater uncertainty in international affairs, it is difficult to predict what changes might occur in import materials and supplies prices, exchange rates, and logistics costs," adding, "For a while, companies are more likely to consider a freeze rather than cuts."