“The inflation rate is around 0%, so it makes me laugh.”
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On the afternoon of the 2nd, a citizen is looking at green onions at a vegetable corner in a large supermarket in Seoul. [뉴스1]
– This is a comment on an article about the’January consumer price trend’ of the National Statistical Office released on the 2nd. Last month, the consumer price index (105.79) rose 0.6% from a year ago. It is a 0% increase for 4 consecutive months since last October. According to government statistics, it is’zero prices’, but the gap with the’dining table prices’ is large. In the aftermath of the highly pathogenic avian influenza (AI) to vegetables and fruits that were harvested by typhoons and rainy seasons last year, the price of eggs all rose.
![Instant rice items on display at a hypermarket in Seoul last December.[연합뉴스]](https://i0.wp.com/pds.joins.com/news/component/htmlphoto_mmdata/202102/14/6e269b3a-040d-4fe4-bf01-fb39456d9419.jpg?w=900&ssl=1)
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Instant rice items on display at a hypermarket in Seoul last December.[연합뉴스]
– I am more worried after the holidays. Prices for various food products await. CJ CheilJedang and Ottogi, the 1st and 2nd largest companies in’instant rice’, increase product prices by 6-7% after the Lunar New Year holidays. Ramen makers, which have been freezing prices for the past few years, are also fiddling with impression cards. The price of food-related industrial products is also rising as the prices of grains such as rice and wheat are rising.
This is why voices of concern come out as a precursor to the’third agflation’. Agflation is a combination of’agriculture’ and’inflation’. It means that the rise in the price of food products, such as agricultural products, pushes up the general price.
Mijin Cho, a researcher at NH Investment & Securities, pointed out that “as the prices of corn and wheat have risen significantly, it is inevitable for food and beverage companies that have exhausted their stocks to raise prices.” .
World Food Price Index Highest in 6 Years
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![In February 2019, a farmer is harvesting in Phnom Penh, Cambodia.[AP=연합뉴스]](https://i0.wp.com/pds.joins.com/news/component/htmlphoto_mmdata/202102/14/6354a30e-f662-4a3e-a3c5-405132251460.jpg?w=900&ssl=1)
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In February 2019, a farmer is harvesting in Phnom Penh, Cambodia.[AP=연합뉴스]
– The atmosphere in the global grain market is unusual. Since the second half of last year, I don’t think that the price will go down. The Food and Agriculture Organization of the United Nations (FAO) released the global food price index (average from 2014 to 16 = 100) on the 7th, up 4.3% from the previous month to 113.3. It rose for eight consecutive months and reached the highest level since July 2014 (116.4). By item, grain (124.2) rose 7.2% and the remaining four product groups (oils, meat, dairy products, sugar) all increased prices.
FAO forecasts that food prices are likely to rise further. “Food inflation is now a reality,” said Abdoleza Abbasian, FAO chief economist.
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Soaring World Food Price Index. Graphic = Reporter Jaemin Shin [email protected]
– Since the 2000s, aflation has appeared twice. The first agflation (2006-2008) started in earnest as demand for grain in emerging countries such as China and India increased, and food production was jagged due to extreme weather. The money released by the US Federal Reserve’s low interest rate and weak dollar policy flowed into the commodity market, including grains, and raised prices.
Even during the 2nd agflation (2011~12), the US and Europe increased their money supply and commodity prices such as grain rose to prevent the global economic downturn caused by the European fiscal crisis. In addition, extreme droughts occurred in major grain-producing countries, such as the United States and Russia, and prices soared.
Bad weather overlaps with corona variables
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![In 2018, piglets are feeding from their mothers on a pig breeding farm in the Guangxi Zhuang Autonomous Region in China.[로이터=연합뉴스]](https://i0.wp.com/pds.joins.com/news/component/htmlphoto_mmdata/202102/14/77331cc7-95b9-4d71-a920-754adcd68269.jpg?w=900&ssl=1)
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In 2018, piglets are feeding from their mothers on a pig breeding farm in the Guangxi Zhuang Autonomous Region in China.[로이터=연합뉴스]
– The current situation is similar to that of the 1st and 2nd aflation. First of all, the demand for food in emerging countries such as China and India is increasing. The Financial Times (FT) said, “Since last year, as the African swine fever (ASF) has ended in China, pig breeding has normalized and grain consumption is increasing.” India, which has successfully controlled Corona 19, is also seeing an increase in food consumption.
There are also extreme weather conditions. Last year, heatwaves, torrential rains, and droughts occurred in the United States, China, and Europe, and the crop harvest was severely affected. According to the World Meteorological Organization (WMO), the La Niña phenomenon will continue until May, and there is a prospect that production and exports of major grain exporting countries such as North and South America may be disrupted.
Corona 19 variables have also been added. Restrictions on movement between countries made it difficult for the smooth movement of labor required for the supply of fertilizers and pesticides and sowing and harvesting agricultural products. Food supply chain disruption is also occurring due to logistics paralysis.
![Wheat fields in Stavropol, Russia in 2016. [로이터=연합뉴스]](https://i0.wp.com/pds.joins.com/news/component/htmlphoto_mmdata/202102/14/abf3f653-f6ce-446d-9e9d-bf785f618e6f.jpg?w=900&ssl=1)
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Wheat fields in Stavropol, Russia in 2016. [로이터=연합뉴스]
– The movement of food protectionism such as restrictions on agricultural exports and tariffs, as each country strengthens food security, is also a factor that stirs up agricultural prices. FT said, “The recent rise in wheat prices is largely due to the fact that Russia, the world’s largest wheat exporter, has increased export tariffs and reduced the amount of overseas supply as its country’s wheat supply is different.”
Another analysis suggests that the increase in demand for biofuels caused by the Joe Biden government’s policy to expand biofuel production could also raise corn and soybean prices. There is also a view that amid the weak dollar, huge amounts of money released globally could flow into agricultural products, further boosting food prices.
Kim Hyo-jin, a researcher at KB Securities, said, “The US Department of Agriculture expects that the inventory of major grains, such as wheat, will increase in the future. I said.
Reporter Seungho Lee [email protected]
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