If you think food prices are high now, expect them to continue to rise over the next year as the country reels from imported food inflation.
Already we re paying higher prices for flour, bread, cakes and even beer and there is more to come this year.
This from president of the Supermarket Association of T&T Rajiv Diptee who noted that the cost of imported as well as locally manufactured goods will continue to increase.
He explained that domestically, manufacturers are constantly faced with higher costs of operation arising from the fall out of the COVID-19 pandemic which eventually trickles down to the consumer.
And as this country remains import dependent, Diptee said very little can be done to address this.
“From all indication food prices are going to take us through this year because there is no quick fix for the pandemic. Not only the cost of operation but also the cost of everything including packing, even wax paper has gone up,” Diptee added.
He noted there continues to be alarming increases in the cost to clear containers, adding that suppliers could no longer absorb these higher rates.
“Freight insurance and the cost of shipping continue to increase. Right now a container can cost as much as up to US$22,000 which is up from US$4,000 in October 2019. There has been an alarming increase in the cost of shipping,” he added.
Last month, in its latest monetary policy report, the Central Bank noted that food inflation surged to 7.6 per cent (from 5.8 per cent in September) and is likely to rise further given the situation in global grain markets.
Economist Dr Vaalmikki Arjoon argued the pandemic has exposed inherent weaknesses in global food production and distribution, which continue to threaten global food security, by increasing the cost of feeding the world.
He cited that the United Nations Food and Agriculture Organisation (UNFAO) food price index that showed prices increased by 27.3 per cent between November 2020 and 2021.
Arjoon pointed out that global prices for several staples surged in the last year, with increases in meat by 17.6 per cent, diary by 18.8 per cent, sugar by 37.9 percent, wheat by 18 per cent, soybean by 54 per cent, and vegetable oil by 51.4 per cent, just to name a few.
According to Arjoon, such price increases largely occurred due to the surge in global spending and consumption, as economies reopened, demand levels quickly rebounded since many people were able to acquire jobs and those who held back spending during the lockdowns accelerated their consumption levels to make up for the loss in spending in 2020.
However, he said this hefty demand is outweighing the pace of production, promoting shortages and is expected to continue well into 2022, causing further price increases.
Notably, Arjoon added, wheat prices increased globally, given declines in production and inventories from key producers including the US, Canada and Russia against a rising global demand.
“While there is likely to be some increase in production from Australia, the EU and Ukraine, this overall shortage may continue well into 2022, with global export demand projected to grow by 1.8 per cent, while inventories estimated to fall by 2.2 per cent.
“Sugar production is likely to rebound by over two percent after a three-year consecutive decline but will again fall short of global demand, not only due to the rise in consumption activities but also since Brazil allocated part of its output to ethanol production,” Arjoon said.
Last year, adverse weather conditions also affected sugar production in Brazil while prices also increased given the appreciation of its currency relative to the US dollar.
Further, Arjoon said the African Swine Fever has reduced the supply of pork while the availability of land and feedstock ingredients for cattle has lowered the supply of diary worldwide.
“These are just some of the factors that intensified food price increases over the last year, which is reflected in food prices locally in the supermarkets, given the intensity of our import appetite for foreign food items,” he noted.
Going forward, Arjoon said T&T can expect these increases to be compounded further by shortages caused by delays at major international ports; severe freight charges; higher black market forex fees for importers who cannot access adequate forex from authorised dealers; higher energy prices; fertiliser costs; and customs overtime and port rental charges.
The UWI lecturer said this will render it more expensive for households to put food on the table, pressure their budgets already strained by the pandemic, and further exacerbate poverty levels locally.
He noted that with global shortages and price hikes, many in T&T last year switched their demand to local alternatives.
For instance, there was an uptick in the demand for local poultry and dairy items causing price increases, given the decline in imports of these items, he cited.
However, Arjoon said the hikes in the cost of production, including fuel costs and adverse weather conditions which disrupted the supply of vegetables and fruits also contributed to price increase.
“Food processors would have also seen an increase in the price of the inputs used in the production process, not only food input used as ingredients, but also machinery and equipment, which would have compounded price increases locally,” he added.
And while VAT removals successfully limited the extent of price increases, the prices of many commodities popularly consumed by the most households were higher in December 2021 relative to December 2020, Arjoon said.
For instance, the average supermarket prices in central and north Trinidad increased for certain brands of margarine and full cream milk by 12.12 per cent and 3.11 per cent respectively, eggs by 5.39 per cent, macaroni by 18.88 per cent, loose red beans by 9.45 per cent, channa by 12.31 per cent, and potatoes by 11.61 per cent to name a few, Arjoon pointed out.
Additionally, he said with wheat importers NFM and Nutrimix intending to increase flour prices, this will exacerbate the already high cost of living
“Everyone including businessowners and their households will be faced with this increased cost of living due to increased flour prices--they will again transfer this higher cost onto consumers, which will inflate prices even more, not just for items for which flour is used to produce but also other consumables that are used daily.
“This will prompt workers in the public and private sector to call for higher wages - which in turn, will compound business costs, leading to even higher prices,” Arjoon advised.
Going forward, he recommended that local manufacturers, especially food processors, should consider using hedging strategies, to lock-in specific prices from suppliers of raw materials, such as agricultural commodities used in the food processing industry etc, thereby protecting themselves from having to pay higher prices in future if there are further price increases on the global market.
This, Arjoon added, will inhibit price increases for local consumers.
Further, he noted the US is likely to increase interest rates in 2022 to curb some of their excess spending and their 6.8 per cent inflation – this should help to restrain price increases of imported goods.
Moreover, he said, local farmers have benefited from some increased labour productivity and a lower wage bill, through hiring some Venezuelan workers.
Others, he added, have embraced greenhouse technology, so their production would not be affected by weather conditions.
These factors, Arjoon said can assist in lowering some costs and increasing some production, but such benefits are still far outweighed by the increase in costs caused by the global price hikes, supply shortages and transportation costs.
Lecturer at the Faculty of Agriculture at UWI Dr Ronald Roopnarine added imported agricultural inputs such as fertilisers and pesticides as contributors to increases in local produce.
Among the mitigation measures he suggested are improved technology and mechanisation towards climate resilient production, noting that digitization of agriculture and greater integration of technology into agricultural operations can optimise agricultural production and output.
Roopnarine explained that one of the most important issues in the agri-food industry and its supply chain is by-products, treated as wastes and discarded immediately.
He suggested that implementation of a circular economy could prevent value loss as such waste can be used for other purposes.
Roopnarine also advised that there be a revised food/agricultural model to not only support primary agricultural producers, but also facilitate the emergence of new, value-added, agro-processing industries, along the whole food supply chain.