Rice has fallen from record highs above 30,000 won per kilogram to around 21,500 won and held steady for nearly a month, reflecting decreased exchange rate volatility rather than increased harvest supplies.
According to Daily NK’s regular survey of market prices in North Korea, a kilogram of rice was trading for 21,500 North Korean won at a marketplace in Pyongyang on Nov. 23.
That was similar to the market price in other regions. The same survey found rice selling for 21,600 won per kilogram at marketplaces in Sinuiju, North Pyongan province, and Hyesan, Ryanggang province.
Back in mid-October, the market price of rice had climbed above 30,000 won per kilogram, setting a new record since North Korea carried out currency reform in 2009. Then in late October, rice prices suddenly plunged nearly 30% and have remained in the low 20,000 won range for nearly a month now.
In most years, rice prices increase in October and November before nosing downward once the year’s rice crop begins to reach market stalls in early December.
But this year, rice prices fell in October, suggesting that the cause was not increasing rice supplies but rather decreasing foreign exchange rates.
Growing market sensitivity to exchange rate volatility
North Koreans’ confidence in the won cratered after the 2009 currency reform, leading more people to convert rice into foreign currency, including the U.S. dollar and the Chinese yuan. For example, a kilogram of rice is equated with 40–70 cents or around four yuan.
Furthermore, North Koreans regard a spike in exchange rates as a sign of inflation. That has produced a tendency to assume that rising exchange rates will keep rising and to stock up on goods that hold their value, such as rice. That is apparently the reason rice prices increase at a faster pace than exchange rates.
The growing volatility of foreign exchange rates at North Korean markets appears to have had an even bigger effect on rice prices.
Significantly, the won-dollar exchange rate rose to 38,000 won in late October before falling to 35,000 won more recently.
The Nov. 23 survey found a won-dollar exchange rate of 35,300 won in Pyongyang, which was 7.6% lower than the survey in late October (four weeks ago) and 4.1% lower than the survey on Nov. 10 (two weeks ago).
Just as with the dollar, the won-yuan exchange rate has continued to fall since mid-October.
The won-yuan exchange rate tends to be higher in Hyesan, Ryanggang Province than in other areas. But even there, the rate on Nov. 23 was 4,650 won, representing a decrease of 5.5% from a month before.
“Because the North Korean market is fundamentally very dependent on imports, local market prices are heavily influenced by exchange rates. When North Korean exchange rates were more stable in the past, grain prices were more influenced by domestic production and supply than exchange rate fluctuations. But given exchange rates’ increasing volatility in recent times, those rates are observed to be having a greater impact on grain prices,” Nam Jin-wook, an associate fellow at the Office of Global and North Korean Economic Studies at the Korea Development Institute, told Daily NK in a telephone interview.
