Russia’s invasion of Ukraine has been posing a threat to Korea’s food security given that the warring nations account for around 30 percent of the world’s traded wheat, according to industry analysts, Monday.
Korea, which has a low food self-sufficiency rate, could face a food crisis in a worst case as a result of rising overall grain prices due to the conflict and abnormal climate conditions caused by environmental change and the prolonged COVID-19 pandemic, they said.
Farmers harvest with their combines in a wheat field near the village of Tbilisskaya, Russia, July 21, 2021. AP-Yonhap
“If Ukraine and Russia experience a setback in wheat exports, wheat prices will naturally rise. In addition, corn and soybean prices, which are highly synchronized with wheat price, will also rise, adversely affecting Korea,” Lee Choon-soo, a professor at the College of Life Science and Natural Resources at Sunchon University, said. “If grain prices surge, food and livestock feed prices will rise, which will lead to overall inflation.”
Ukraine accounts for 12 percent of the world’s wheat exports, while Russia occupies 18 percent. Data shows that grain prices have been on the rise due to a series of events. According to data gathered by the Korea Customs Service, the price of grain imports per ton in February was $386, up 26 percent from the same period in 2021. Compared to February 2020, just before the COVID-19 crisis began, 2022’s figure is 47.4 percent higher.
The professor predicted that grain prices would continue to rise as recently climbing oil prices will also increase demand for bioenergy sources using grain. “When the global agriculture market saw steep price rises between 2007 and 2008 and 2010 and 2011, the price hikes were caused by the increased demand for bioenergy. Given soybean and corn are primary resources for bioenergy, the overall grain prices will keep rising,” he said.
The soaring grain prices present a serious threat to Korea. According to data from the Korea Rural Economic Institute, the country’s food self-sufficiency rate has continued to decline from 50.2 percent in 2015 to 48.7 percent in 2017 and 45.8 percent in 2019.
Comparatively, Korea’s grain self-sufficiency rate has declined to 21 percent in 2019 from 23.9 percent in 2015.
Han Yoo-jung, an analyst at Daishin Securities, suggested an outlook on shares of snack and noodle makers such as Nongshim, Orion and Samyang Foods moving from overweight to neutral due to the higher grain prices.
“Between 2016 and 2020, Korea was included in the top eight importers of Ukrainian wheat and the top three importers of Russian corn. There are optimistic scenarios such as stabilizing the Ukraine conflict or expanding production areas in countries other than Russia and Ukraine, but at this point, the unprecedented uncertainty in the grain market is of great concern,” the analyst said.
As a solution to the price hikes, the Sunchon University professor suggested the government provide more active support to domestic companies to cultivate various grains in areas overseas. “In the long run, encouraging local firms to cultivate crops in places other than Korea will be one of the ways to resolve the issue, but it takes time. In the short term, releasing grain reserves the government has at a low price could become another method of resolution,” he said.
In response to the rising grain price, the Ministry of Agriculture, Food and Rural Affairs announced a plan to increase the self-sufficiency rate of wheat by expanding domestic wheat reserves.
“In order to stabilize the supply of wheat and ensure food security, the government plans to increase its wheat reserves to 14,000 tons this year, up 5,600 tons from 8,400 tons in 2021,” the ministry said in a statement.
To make things more convenient for local wheat farmers, the government will start purchasing wheat in June, one month earlier than it did last year at the end of July, to avoid crossing over into the rainy season here, the ministry added.
“This year, the preparation period, such as preliminary quality inspection, will be shortened, and the purchase process will be moved to June immediately after harvest. Accordingly, it is expected that the weight of wheat storage and management on farmers and the deterioration of quality due to the rainy season will be reduced,” it said.
