Ensuring Korea’s food securityPrice spikes in the international grain market due to a once-in-a-century drought in the U.S. Midwest have raised fears of agflation. Those fears seem justified in the midst of a scorching summer that has helped drive the price of corn, wheat and soybeans to record highs.
Agflation - a combination of agriculture and inflation - has been a consistent threat to the global economy in recent years. The commodities market has been more volatile due to erratic and warmer weather, trade disruption and increased demand for grain for use in biofuels. The phenomenon only gets worse when major central banks boost liquidity to stimulate their own economies.
Agflation that affects the food chain and consumer prices is a significant a headache for resource-challenged countries like Korea, which depend on imports for their staple grains.
Higher prices in the grain sector take about four months to reach food producers and seven to hit consumers. More expensive food will further dampen consumer spending at a time when the economic outlook for Korea and the world is uncertain at best.
Korea imports about 74 percent of its grain, and prices for wheat and corn have risen sharply.
A handful of major producers - the United States, Canada, Brazil, Russia and Australia - account for 80 percent of world grain supplies. Because producer countries export only about 10 percent of their production, any supply disruption would have serious consequences in the face of constantly increasing demand.
Doing nothing is not an option.
Food prices in 2008 caused crises and protests worldwide. It is imperative that fluctuations in the cost of agricultural imports be understood as the new reality. The resulting economic fallout cannot be avoided by flexible tariff rates, diversification of importers or improving distribution.
We must seek a long-term solution by developing reliable overseas food sources. The government plans to revive a project proposed four years ago to secure Korea’s foreign food supply. The shelved plan envisions raising food self-sufficiency to 50 percent by 2030 by securing 25 percent of Korea’s needs from outside Korea.
It’s a good start.
We must be as aggressive in developing reliable overseas sources for food as we are with energy.