COST OF IMPORTED FLOUR CONTINUES TO RISE

[Anchor Lead]

Amid high inflation affecting food prices, the cost of imported flour is expected to rise again. The global grain market, shaken up by the war in Ukraine, has found some stability in recent days. But the rising foreign exchange rate has become a new variable to watch out for.

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Yellow grains are piled up on a massive ship that is twice as long as a football field. They are quickly unloaded from the vessel. This is maize, to be used as forage, which left Ukraine a month ago. The total amount is 60-thousand tons.

[Soundbite] Baek Sang-yun(POSCO International) : "Ships were stranded for some time due to the war. Then Black Sea exports to S. Korea resumed as Ukraine struck a deal in Aug. with Russia and Turkey."

South Korea's corn and wheat imports from the Black Sea region, such as Ukraine, account for about 10% of total volume. Currently, some 20 million tons of grains are known to be stockpiled in the war-torn country. As Black Sea exports gradually normalize, the index on international grain prices, which surged in the wake of Russia's invasion, somewhat stabilized in the third quarter. Exports from this region are expected to rise further. But there's another variable affecting prices -- the skyrocketing foreign exchange rate. The price of imported wheat surged 45% on-year last month and corn nearly 50%. The won-dollar exchange rate posted sharper gains this month.

[Soundbite] Kim Sang-hyo(Korea Rural Economic Inst.) : "Exchange rates affect import prices as futures trade payments are being made at the present time. Processed food prices could be affected late this year or early next year."

In a report to parliament, the government predicted that flour prices which also rose three times since last year could rise again later this year. Grocery and dining-out costs could further flare up as price hikes of processed foods, such as instant noodles and snacks, are also expected next month. The government has urged the food industry to refrain from price increases, but without any feasible solution, prospects remain unclear.