Korea seeks measures to prevent food price rises


Concerns are rising that the world may face a food crisis due to rising grain prices caused by drought and heat waves in the United States and Russia.

According to the U.N. Food & Agriculture Organization, its Cereal Price Index averaged 260 points in July, up 38 points (17 percent) from June and only 14 points below its all-time high (in nominal terms) of 274 points registered in April 2008.

The severe deterioration of maize crop prospects in the United States, following drought conditions and excessive heat during critical stages of the crop development, increased maize prices by almost 23 percent in July.

The U.S. Department of Agriculture has declared more than half of the U.S.’ counties disaster areas after record heat and little rain, while Russia’s wheat harvest may be as much as 28 percent smaller than a year earlier because of drought, according to Moscow-based researcher SovEcon.

“The drought is very severe in the U.S., and other parts of the world won’t have supplies to compensate for the shortfall,” Concepcion Calpe, a senior economist with the FAO, said by phone from Rome before the report.

Prices for wheat, soybeans and corn have risen the most this year among 24 commodities tracked by the Standard & Poor’s GSCI Index. Countries including Brazil, Indonesia, the Philippines, Turkey and Sudan have reported accelerating inflation in July linked to higher food costs.

The International Food Policy Research Institute, a U.S. think tank on food security, warned that a global food crisis may “hit us very soon” as a drought ravages corn crops in the U.S., the world’s largest grower. Governments must act to prevent the crisis, Shenggen Fan, director-general of the institute, said.

The U.S. should end its biofuel program that uses 40 percent of its corn output, to boost supplies to meat producers, Fan said.

Jose Graziano da Silva, director-general of the FAO, called for a suspension of U.S. government-mandated ethanol production to allow more of the crop to be used for food and livestock feed, the Financial Times reported Aug. 10.

During his visit to Korea, the FAO chief called for global governance to deal with what he said only seems like a global food shortage.

He said the real issue or problem facing the world was not a shortage of food, but countries acting selfishly and stockpiling food.

“We can avoid (a crisis) if countries can act in a cooperative way and establish a kind of governance to avoid that each country takes decision that they think is best for their own country, but will in fact worsen the food situation in the world,” Da Silva said in an interview with Yonhap News.

The signs of food crisis are also alarming Korea, hit hard by weeks of scorching weather and under pressure to raise the prices of agricultural products.

The Korean Finance Ministry said Tuesday that it would release additional food stocks and take other measures to help keep food prices from going up amid worldwide agflation.

Agflation, a combination of agriculture and inflation, refers to a phenomenon where high food prices exert upward pressure on inflation.

The ministry said that to prevent a sudden rise of prices due to low supply, the government will release 3,500 tons of government-stock white cabbages before Chuseok, the traditional Korean Thanksgiving holiday when demand for food usually surges to the year’s highest levels.

Noting the recent rise of food prices has also been caused by a price hike of processed food products, the minister said the government will intensify its penalties for companies that raise their prices through what he called tricky means that apparently include price-rigging and reducing the volume of contents in packaged products.

Bahk said penalties will include collecting undue profits from such practices.

(From news reports)