Price Anxiety Increases over Effects of Hot Weather, Typhoon, and High Oil Prices

“Skyrocketing oil prices, the hottest weather in 10 years, and a typhoon…”

Kim Bong-ik, manger of the Price Policy division, has not been sleeping well recently because of Typhoon Megi. Damages from the typhoon have led directly to soaring farm prices. It’s not a situation that he can drop off into sound sleep after thinking of it.

At the end of last month, Kim visited a horticulture cooperative association in Daegwanryung and an agricultural cooperative association in Jungsun. Those two cooperatives are responsible for 90 percent of all cabbages, radishes, and potatoes that are furnished to the National Capital region and the Choongchung region.

As the prices of vegetables soar as the hot weather continues, he visited the two cooperatives to look for vegetables that were ready to be forwarded. With the support of 500 five-ton trucks from the National Agricultural Cooperative Federation, he led the conveyance of cabbages for seven days since August 2.

With his efforts, cabbage, which was priced up to eight million won per one five-ton truckload of cabbages at the beginning of the month, is now priced at four million to five million won.

On August 19, Kim and the officials of the Price Policy division were again on their phones all day to find the total of the damages that Typhoon Megi brought.

Kim said, “The influence that agricultural products make on the prices of commodities is 6.6 percent. Damages to fruits and vegetables lead directly to inflation.”

However, vegetable prices are still high. There have been sayings that radish and cabbage prices are like gold prices.

Kim felt bad when his wife talked about cabbage prices last weekend before a memorial service for his father. His wife went to a market to buy cabbages, but she only bought half of a cabbage because of the high prices.

Kim said, “Cabbage, which was priced at 1,800 won per head last year, is now priced at 4,000 won. It sounded to me like that she was blaming me, saying, ‘Aren’t you responsible for the prices? Do you even know that prices are soaring’? “

Still, prices of agricultural products can be controlled a bit by working deliberately on them. However, nothing can be done to control high oil prices, which are decided in the world market.

The reason Kim is working so hard is that prices in the second half of the year seem critical.

The government’s plan is to hold the increase in prices this year to the mid-three percent level. However, consumer prices have increased by 4.4 percent since July 2003. An increase of over four percent has not happened for a year and four months.

According to “Price Trends on Processing Stages in July,” released by the Bank of Korea, prices of raw materials and intermediate goods were 111.6 (100 in year 2000), and they increased by 13.8 percent compared to last year. It’s the highest rate of increase since a 16.2 percent rise in November 1998.

A well-informed private expert said, “Prices in August will increase even more from July, and it is forecasted to increase by over four percent. The government will have to change their price target to 3.5-4.0 percent next month.”

Chi-Young Shin higgledy@donga.com