The South Korean kimchi crisis

The Washington Post reported this week (possibly paywalled for you):

In the foothills of the rugged Taebaek range, Roh Sung-sang surveys the damage to his crop. More than half the cabbages in his 50-acre patch sit wilted and deformed, having succumbed to extreme heat and rainfall over the summer.

“This crop loss we see is not a one-year blip,” said Roh, 67, who has been growing cabbages in the highlands of Gangwon province for two decades. “I thought the cabbages would be somehow protected by high elevations and the surrounding mountains.”

With its typically cool climate, this alpine region of South Korea is the summertime production hub for Napa, or Chinese cabbage, a key ingredient in kimchi, the piquant Korean staple. But this year, nearly half a million cabbages that otherwise would have been spiced and fermented to make kimchi lie abandoned in Roh’s fields. Overall, Taebaek’s harvest is two-thirds of what it would be in a typical year, according to local authorities’ estimates.

The result is a kimchi crisis felt by connoisseurs across South Korea, whose appetite for the dish is legendary. The consumer price of Napa cabbage soared this month to $7.81 apiece, compared with an annual average of about $4.17, according to the state-run Korea Agro-Fisheries Trade Corp.

The effects of poor weather on the markets for cabbage and kimchi can be easily analysed using the supply and demand model that my ECONS101 class covered the week before last. This is shown in the diagram below. Think about the market for cabbage first. The market was initially in equilibrium, where demand D0 meets supply S0, with a price of P0 and a quantity of cabbage traded of Q0. Bad weather reduces the cabbage harvest, decreasing supply to S1. This increases the equilibrium price of cabbage to P1, and reduces the quantity of cabbage traded to Q1.

Now consider the market for kimchi. The costs of producing kimchi have increased. That leads to a decrease in the supply of kimchi. The diagram for the market for kimchi is the same as that for cabbage, with the equilibrium price increasing, and the quantity of kimchi traded decreasing. At least, that is the case for kimchi made from cabbage. Kimchi can also be made from other vegetables. The Washington Post article notes that:

The fermented pickle dish can also be made from radish, cucumber, green onion and other vegetables.

What happens in the markets for kimchi made from radishes? That is shown in the diagram below. Radish kimchi is a substitute for cabbage kimchi. Since radish kimchi is now relatively cheaper than cabbage kimchi, some consumers will switch to using radish kimchi. The effect is shown in the diagram below, where the radish kimchi market is initially in equilibrium with a price of PA, and a quantity of radish kimchi traded of QA. This increases the demand for radish kimchi from DA to DB, increasing the equilibrium price of radish kimchi from PA to PB, and increasing the quantity of radish kimchi traded from QA to QB.

The South Korean kimchi crisis is echoing through all types of kimchi, even if it is just the cabbages that are affected.

[HT: Marginal Revolution]