Korea Suffers Soybean Shortage

Korea Suffers Soybean Shortage
(Chosun Ilbo, Korea)

Korea is feeling the pain of the global grain crisis. For some time, small tofu makers have been having trouble operating their factories due to rising soybean prices. Now some are letting their factories idle because they can't get soybeans at all, no matter how much they are willing to pay.

Large businesses have yet to have problems purchasing soybeans, but they are also complaining about rising costs. Consumers haven't been exempted from the pain, either – the market price of soybeans has almost doubled that of last year.

The Korea Agro-Fisheries Trade Corp. failed to import a planned 21,000 tons of soybeans late last year. A Chinese exporter broke a contract with the corporation last August to sell soybeans for US$495 a ton even though it had to pay a penalty. The trade corporation had to place an order for soybeans at $630 a ton with another trader.

Although it has not drawn as much attention as wheat, corn and rice, soybeans are at the center of the recent "agflation", or agricultural products inflation. The trading price of soybeans at the Chicago Board of Trade has been rising steadily, from $5.25 a bushel (27.2 kg) in October 2006 to $7.35 in January 2007 to $12.64 this month. This has caused the import price per ton paid by the Korea Agro-Fisheries Trade Corp. to increase from $330 in 2006 to $378 in 2007 to $690 currently. A supply shortage is part of the problem.

The biggest reason for the rising prices of agricultural products is soaring demand in China and India. Their economies have grown rapidly, causing demand to grow, while yields have fallen due to serious weather conditions. Another reason is that farmers have started to replace soybean crops with other grains as high oil and fertilizer prices have increased production costs, and alternative energy sources made of grains like ethanol and bio-fuel have become more popular.

Speculation funds are flying into the grain market. Yoo In-taek, a manager at Pulmuone, which runs a soybean farm in China, said, "Even China is importing soybeans from the U.S. because growing demand has lowered the soybean supply. As a result, the Chinese government announced that it will impose grain taxes to control exports of soybeans to other countries." Korea needs to come up with long-term measures to secure grain without difficulties, he added.