Fruit-flation: An Apple Every Morning Becomes a Luxury
Fruit-flation: An Apple Every Morning Becomes a Luxury
  • Reporter Kim Yu-jin
  • 승인 2024.05.20 17:29
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▲Fruit stand in Hyoja Market
▲Fruit stand in Hyoja Market

  South Korea has very steep prices for agricultural products, especially for fruits. According to the Korea National Statistical Office (KNSO), the consumer price index (CPI) of apples and pears in April rose 80.8% and 102.9%, respectively, compared to the prices in the same month last year.

  These steep prices are related to many causes, but fundamentally due to three main reasons: high production costs, high import prices, and distribution structure. The high production cost due to limited sites suited for agriculture and the high labor cost from small-scaled private orchards makes it hard to follow large-scale orchards that benefit from economies of scale. Imported fruits do not help relieve the situation, for the relatively small import volume compared to other countries makes it hard to import the fruits for cheap prices. Another problem is the distribution structure of fruits in South Korea. The conventional distribution structure is formed of four steps: the producer, wholesale trader, retailer, and consumer. But by South Korean law, when fruits are traded in public wholesale markets they must go through a fruit auction by the wholesale corporation, adding an extra step and creating additional distribution costs. Considering that 50% of the consumer price is distribution cost, the distribution structure is a big factor in the fruit prices. Additionally, an increased portion of greenhouse-cultivated fruits resulting in the linkage of fruit production cost and energy price reacted to the rise in oil prices.

  In response to this situation, the Korean government is concentrating on the distribution structure. In March, it deployed 150 billion KRW’s worth of funds to stabilize the “fruit-flation” of which 75.5 billion were used for delivery prices. The effect was immediately visible, lowering the retail price of apples. However, this fund had no effect on the wholesale price, bringing about the criticism that only the distribution dealers benefitted from the fund and left the farmers neglected. It seemed like the problem was solved in one fell swoop, but the measure only scratched the surface. Once the fund is exhausted, the cycle will start again. On May 1 the government presented its plan to reduce the distribution cost by 10%, launching an online wholesale market. By simplifying the distribution process and making national-level trade easier, the distribution cost will be reduced and consumptions can be revitalized. The government plans to expand the online market to a scale of 5 trillion KRW by 2027. In addition, by encouraging packaging-free produce the government anticipates a decrease in distribution costs. It is also making efforts to solve the fundamental problem, the lack of supply of fruit, by building agricultural products distribution centers (APC) and low-temperature warehouses equipped with controlled atmosphere (CA) for longer storage periods of fruits.

  The rise in prices, especially in produce, is affecting not just our economic conditions but also our health. The decrease in the intake of fresh food is critical to the welfare of the people. Agriculture is an important foundation of the human race, regardless of the advancement of technology. We must take this matter seriously and plan for the mutual improvement of producers, distribution dealers, and consumers.