UPDATE 1-S.Korea to lift agricultural produce supply until Feb 1

* Anti-inflation measures due on Thursday

* Plans to form US grain trading house in first half 2011

(Combines with trading firm launch plan, official comment)

SEOUL, Jan 11 (BestGrowthStock) – South Korea will increase the
supply of vegetables, meats and fish to cope with growing food
inflation ahead of the Lunar New Year holiday, and start direct
imports of grains through its own trading company.

The measure to contain food prices by releasing government
stocks and cracking down on unfair trade is temporary and
separate from a package of anti-inflation measures to be
announced on Thursday.

“Increases in food and global raw material prices have been
factors behind domestic price rises, but there is also
demand-pull price pressure building at home,” a finance ministry
official told Reuters on Tuesday.

“We are preparing price measures taking into consideration
all of them,” he said.

The new policy steps will coincide with the Bank of Korea’s
decision on interest rates on Thursday morning, when it is
widely expected to pause for a second month but to sharpen
anti-inflation rhetoric. [ID:nTOE70301F]

The government would expand supplies of 16 agricultural and
fishery products including radishes, napa cabbages, apples, eggs
and mackerel by 1.7 times between Jan. 12 and Feb. 1, the
Ministry of Strategy and Finance said in a statement.

“The measure is aimed at keeping prices stable, as demand is
increasing for those products ahead of the New Year holiday, and
is also aimed at taming expectations of price volatility,” said
Lee Yong-jae, a finance ministry director in charge of the price

The rapid spread of foot-and-mouth disease since late last
year has added to concern over rising meat product prices, he

Food prices make up about 15 percent of South Korea’s
consumer price index and tend to accelerate inflation
expectations because the country relies on corn, soybean and
wheat imports to meet most of its demand.

Producer inflation hit a two-year high in December, led by
food and energy prices and added to evidence of rising consumer
inflationary pressure around the region. [ID:nTOE706070]

Last week, the United Nations Food and Agriculture
Organisation reported that global food prices were at a record
high, raising concern about a possible repeat of the 2008 food

South Korea is planning to establish its own grain trading
company in Chicago in the first half of 2011 as it seeks to
mitigate the impact of global food price volatility.

The move, led by the state-run Korea Agro-Fisheries Trade
Corp (aT) will be included in the set of anti-inflation measures
due on Jan. 13.

The state-run body has formed a consortium with four local
companies — CJ CheilJedang Corp (097950.KS: ), Samsung C&T
(000830.KS: ), STX Corp (011810.KS: ) and Hanjin Transportation Co
Ltd (002320.KS: ) — to launch the trading company in Chicago.

The companies involved are now discussing the management
structure and business plans for the trading company, which will
import 100,000 tonnes of grains in its first batch in the second
half of this year, said Lee Pil-hyung, head of the grain
business management team of aT.

South Korea, the world’s third-largest corn buyer, imports
14 million tonnes of grain annually, mostly through grain
trading giants such as Cargill Inc [CARG.UL].

The country is aiming to import 4 million tonnes of grain,
or 30 percent of total imports directly through the new trading
company in 2020 to increase food security at a time when record
high food prices are posing a headache for policymakers.
(Reporting by Kim Yeonhee, Lee Shin-hyung and Cheon Jong-woo;
Editing by Ken Wills)