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| A woman stands in front of restaurant stalls in Myeong-dong, downtown Seoul, Sunday. Yonhap |
By Lee Yeon-woo
The government is urging food manufacturers to control their prices as they continue to rise despite the relative stabilization of other consumer prices. While production costs are soaring, concern is being raised that the government pressure may only end up in a sudden and steep increase in food prices, which would further burden consumers.
According to Statistics Korea, Monday, the price of dining out increased by 7.6 percent last month, marking the biggest jump since 1992. Prices of processed food also rose by 7.9 percent, with three out of ten items experiencing a double-digit rise.
These figures are more than double the 3.7 percent rise in overall consumer prices, which entered the three percent range for the first time in 14 months.
The government thus has been urging the food industry to avoid any price hikes, and if necessary, to minimize the pace of price increases.
During a meeting with 12 domestic food corporations in February, Minister of Agriculture, Food and Rural Affairs Chung Hwang-keun expressed hopes that the food industry would cooperate as much as possible to stabilize prices during the first half of this year.
Finance Minister Choo Kyung-ho joined the efforts, urging the food industry to "absorb the causes of price increases as much as possible by cutting production costs." He made the remarks during the emergency meeting held in March.
Food companies are seemingly complying with the government's demands, either withdrawing or delaying price hikes. However, the measure comes with a cost. CJ CheilJedang, a leading producer, for example, is expected to see a 31.9 percent decrease in its operating profits for the first quarter of this year, according to brokerages. Rising costs in labor, distribution and energy as well as surging rent are pushing up production costs and eating into profits.
The food industry thus says that the price hike is eventually unavoidable and that the continued pressure by the government could possibly burst into a sudden and significant increase in food prices.
"In the short term, corporations may be able to bear the burden. However, the natural principle of the market is that prices should rise when costs increase. If these underlying issues are not addressed, it may become inevitable to raise prices," said an official from a food industry on condition of anonymity.
"Businesses may feel compelled to consider the price hike at a point if their poor financial performance leads to plunging stock prices."
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