Archive for the ‘Market prices’ Category

March 2021: North Korea’s skyrocketing corn prices

Tuesday, March 9th, 2021

By: Benjamin Katzeff Silberstein

Given the self-imposed border lockdown North Korea is under at the moment, the recent rise in food prices should come as no surprise. The precise factors are difficult to pin down, but whatever they are, there is some serious cause for concern.

The main reason is the rapid rise in the price of corn as of late. One Daily NK-source in North Korea attributes it to large-scale state purchases of corn for snacks manufacturing in honor of Kim Jong-il’s birthday on February 16th.

The article makes clear, however, that this is only a partial explanation. Indeed, looking at the price index, it’s clear that the rise started long before February. On November 15th last year, the average price for a kilo of corn was 1350 won. On February 23rd this year, the average price was 3137 won. That’s a rise of 135 percent in a relatively short period of time. Prices of corn have often risen in the beginning part of the year, but not by this much.

Average corn prices in Pyongyang, Sinuiju and Hyesan, from 2015 and onward. Graph by NKEconWatch, data source: Daily NK.

Looking at individual cities, the rise is even more staggering. In Hyesan, where food prices tend to be higher in general, corn prices rose from 1450 won/kilo on November 15th last year to 3620/kilo on February 23rd. That’s an increase of 150 percent in only a few months.

Corn prices in Pyongyang, Sinuiju and Hyesan, from 2015 and onward. Graph by NKEconWatch, data source: Daily NK.

Why is this a concerning development for corn prices specifically?

First, corn is, in the North Korean context, rice’s less desired sibling. Corn always makes up a significant part of the diet for a big proportion of the North Korean population. However, when food becomes more scarce, people switch over a larger portion of their diets to corn, since it gives more food for the same amount of money. So a rise in corn prices may be a signal of growing scarcity overall.

Second, even if a large proportion of the rise was indeed caused by increasing state purchases, this is also a troubling indicator for the state of the North Korean market for food. If state procurement for snacks manufacturing for one single day can impact prices so much, this suggests a market under considerable stress and volatility to begin with.

At the same time, rice prices have remained conspicuously low and stabile. Rice prices in the last observation in the price index are around their seasonal normal. I’d be careful to assume too much based on this, however. Rice prices are lower right now than around the same time last year. This may – and I want to stress how little we know for certain – indicate that they are in fact lower not because supply is stabile, but because demand is lower. More consumers switching over their consumption to cheaper foods such as corn would put downward pressure on rice prices.

Average rice prices in Pyongyang, Sinuiju and Hyesan, from 2015 and onward. Graph by NKEconWatch, data source: Daily NK.

The current situation will only be possible to fully evaluate in a few weeks when we have more data points available. Suffice to say for now that, with all the caveats about the trappings of data from North Korea, the situation looks concerning.

Update March 16th, 2021: DailyNK recently published more info about the corn price situation, reporting that prices have stabilized in much of the country. Still, 3,000 KWP/kg, reported in “other inland regions” (than Hyesan), is high. It’s more than double the average price reported in Daily NK’s price index around one year ago.

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Posted in Agriculture, International Aid, International trade, Market prices, Political economy, Statistics | Comments Closed

China delivers oil to North Korea, stabilizing fuel prices

Tuesday, March 2nd, 2021

Benjamin Katzeff Silberstein

On the supply side, fuel prices in North Korea are largely a factor of deliveries from China, as I have shown in a 38 North report. Daily NK confirmed this pattern in a dispatch last month:

Oil prices in North Korea plummeted late last month after climbing at the start of the year. North Korea has reportedly been receiving supplies of oil from China as the two nations show signs of growing closer.

The price of diesel was KPW 3,500 in Pyongyang, KPW 6,000 in Sinuiju and KPW 6,300 in Hyesan as of Jan. 25. This was respectively 56%, 24% and 23% less than it was on Jan. 11, as determined by Daily NK.

The price of oil, on which North Korea completely depends on imports, fluctuates relatively wildly depending on supply. Even so, this was a 23-56% fall in just two weeks.

Particularly in the case of Pyongyang, the price of diesel fell to KPW 3,500, the first time it has done so since 2011, a decade ago.

Gasoline prices fell relatively less than diesel. Gasoline was KPW 10,000 a kilogram in Pyongyang, KPW 11,000 in Sinuiju and KPW 12,000 in Hyesan as of Jan. 11. As of Jan. 25, it was KPW 6,700 in Pyongyang, KPW 11,000 in Sinuiju and KPW 11,100 in Hyesan.

As in the case with diesel, the price drop for gasoline was most pronounced in Pyongyang, where prices fell 33% from Jan. 11.

In Hyesan, however, gasoline prices fell just 7.5% from two weeks earlier, and in Sinuiju they did not change at all.

Diesel prices fell more than gasoline prices because the new supplies from China reportedly focused on diesel.

According to a source, diesel accounted for a large share of the imports smuggled into North Korea by way of illegal transhipment in international waters from ships leaving the Chinese port of Dalian in Liaoning Province.

The source claims North Korea has smuggled oil from China “countless times” since the middle of last month.

Prices fell most precipitously in Pyongyang seemingly because the capital received not only the first supplies but also the most.

(Source and full article: Jang Seul Gi, “North Korea appears to have received supplies of oil from China,” Daily NK, February 4th, 2021.)

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Posted in China, International trade, Market prices, Statistics | Comments Closed

What explains North Korea’s puzzling price stability?

Friday, July 17th, 2020

By Benjamin Katzeff Silberstein

Looking at the latest market price data from North Korea, things do not look like external conditions dictate that they should. Food prices are…low. Very low. In fact, for the July 1st price report, the average rice price for the three North Korean cities was the lowest on record since April 2019. Gasoline prices haven’t been this low since June of 2018. (Click for larger graphs.)

Average rice prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

Average gas prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

 

By themselves, these prices are not so surprising. Prices generally fluctuate with seasonal variation, in North Korea as everywhere else. Both gas and rice prices tend to drop around this time of year, at least over the past few years.

But there is nothing normal about 2020. In addition to harsh sanctions, Covid-19 has made almost everything more difficult to acquire from abroad, from fertilizer and food, to machine parts for industry. So these lower prices are puzzling, in a way because they would seem to indicate stability and normalcy at a time when there is nothing stabile and normal about the situation.

There are (at least) two possible explanations:

One is that North Korea’s external conditions are indeed steadily improving, and returning to some sort of normalcy. Strong signs suggest that trade between North Korea and China is picking back up, as relations deteriorate between the US and China and the North Korean issue becomes less and less central on the global stage. As Daily NK has reported, North Korea has been importing items such as construction materials and food from China, both in June and July. Gas prices, moreover, may partially be untouched by Covid-19 because much of the trade goes through a pipeline near Dandong.

Another possibility is that prices are going down because people simply cannot afford higher prices. This report on train ticket prices is perhaps instructive. In the words of one source inside North Korea: “Despite the fall in the number of train passengers, [black market vendors] seem to believe that raising prices would [make it harder to sell tickets],” the source said. “In other words, you could say that a ‘market price’ [for tickets] has appeared that train riders are willing to accept.” In other words, if consumers on a given market have a reservation prices – the highest price they’re willing to pay – underneath what sellers would really charge given the supply at hand, sellers can either cut down on their profit or minimize their losses by selling at a lower prices than those dictated by economic conditions.

As always, information is in short supply, and these market prices raise more questions than they answer.

Update, 23/7/2020:

Part of what’s so puzzling about all this is that reports keep suggesting that the regime is cracking down continuously and with growing vigor against cross-border smuggling and the like. According to this report by Daily NK, Pyongyang recently ordered provincial authorities to intensify their border monitoring.

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Posted in Agriculture, Black markets, Economic reform, General markets (FMR: Farmers Market), International trade, Market prices, Political economy, Statistics | Comments Closed