Rising Grain Prices Feared to Raise Inflation

The increasing use of bio-fuel worldwide and speculative demand have doubled or tripled the prices of corn, soybean and other crops from a year and half ago.

The Korea Rural Economic Institute said yesterday in a report that the price of corn in the United States, including transportation cost, was 410 U.S. dollars per ton July 14, up 78.3 percent from a year ago (230 dollars).

The institute said, “The increase in the international prices of crops started in the second half of 2006 and is likely to continue. Korea must brace itself for structural agflation (generalized inflation led by rises in agricultural commodity prices).”

According to U.S. Agriculture Department statistics, the average U.S. corn price in 2006 was a mere 164 dollars, thus the July 14 figure is 2.5 times more.

The price of U.S.-grown soybean went up from 278 to 737 dollars over the same period, and that of soybean meal from 261 to 658 dollars.

Inflation over the past year was also sharp, with prices rising 78.3 percent for corn, 86.1 percent for soybeans, and 87.5 percent for soybean meal.

The same went for wheat, which accounts for the second-largest portion of imported grain in Korea after corn in monetary terms. The price of wheat futures traded on the Kansas City Board of Trade July 14 was 310 dollars, up 38.4 percent from a year ago.

cha@donga.com