Wheat, Sugar, Edible Oil Prices Surge, Fueling Food Price Hikes
The prices of key ingredients used in processed foods, such as wheat, sugar, and edible oils, have surged significantly over the past year, prompting concerns about further price increases across the food industry.
According to statistics from the Korea Agro-Fisheries and Food Trade Corporation, the average price of soft red winter wheat (SRW) traded on the Chicago Board of Trade stood at $266.06 per ton in August, up 41% from a year earlier, the highest level in three years and seven months since February 2023.
SRW is used as the primary raw material for flour in cookies, crackers, and cakes, and has been on an upward trend since surpassing $200 per ton in February. Hard red winter wheat (HRW), mainly used in bread and noodles, also surged 58% year-on-year this month to $295.96 per ton.
The main driver behind rising wheat prices is disruption to Black Sea grain shipments caused by the Russia-Ukraine war. Both sides have recently stepped up attacks on each other's ports, vessels, and logistics facilities in the Black Sea and Sea of Azov. Worsening crop outlooks across Europe due to hot, dry weather and a weaker US dollar have also contributed.
Sugar and edible oil prices used in bread and confectionery are rising in tandem, reflecting supply concerns stemming from El Niño and other weather anomalies. The average price of raw sugar this month came in at $396.61 per ton, up 14.2% from a year ago. Soybean oil, used in frying and baking, jumped 37.2%, while palm oil rose 10.8%. Corn futures prices were also up 26.4% year-on-year.
Food companies are raising prices in response to higher raw material costs. Haitai Confectionery plans to increase prices on 25 product lines, including Oyes, Home Run Ball, and Pocky, by an average of 7.8% starting Thursday. The company cited rising raw material costs and higher manufacturing and logistics expenses as reasons for the adjustment.
Bakery chains have also recently raised prices, pointing to higher ingredient and operating costs. Samlip raised prices on 59 bread products by an average of 9.4% from September 1. Paris Baguette increased prices on 127 items, 86 bread products and 41 cakes and desserts, by an average of 5.0% from August 25.
Industry officials warn that further price adjustments could continue, as cost pressures from oil prices, packaging, and logistics linked to the Middle East situation remain.