Food price hike now worrisome
The continual rise in food prices in Jamaica has become a major cause for concern and will herald a steep increase in inflaton as geopolitical tensions in North Africa and the Middle East continue unabated.Jamaica has a food importation billInflation set to increase
In Jamaica many have sought to use this issue for political gain, but it must be made unequivocally clear that escalations in food prices and the subject of food security are global issues and not peculiar to Jamaica alone. The current administration did not cause this problem and so it is grossly unfair to lay it at its feet. More to the point is how it intends to address this situation and whether the Eat Jamaican, Buy Jamaican campaign can have any effect.
Our Caribbean neighbour Trinidad& Tobago is also grappling with this problem. Earlier this month president of Trinidad& Tobago Supermarkets Association Vernon Persad said that the political problems in the Middle East have not only been affecting international oil prices but have been creating problems with food prices.
Speaking with the Trinidad Express earlier this month Persad said: “Eighty-one per cent of our food is imported so there is a direct correlation for us. If oil goes up, other commodities go up as well. Plus sugar, corn and wheat prices have also been increasing.”
The economist Indera Sagewan-Alli also notes that oil prices now at over US$100 a barrel are affecting food prices and the rate of inflation the world over. “Europe is on an inflation watch and the US is looking carefully at the implications of higher oil prices. Rising oil prices will eat away at consumers’ spending power,” she said.
Likewise in Jamaica, rising oil prices are not created by the government but are a direct result of civil instability in a region of the world that produces the best quality crude oil. Rising oil prices will have an impact on all sectors of the local economy, particularly imput costs, and that is a reality we all have to contend with.
For far too long, the Caribbean has relied too heavily on imported foods and has not sought to implement a coherent and workable indigenous food ploicy that would help to redress Balance of Payments deficits.
The over-reliance on imported foods in the Caribbean has not gone unnoticed by Guyana’s Minister of Agriculture, Robert Persaud. At the Validation Workshop for the Draft CARICOM Regional Policy for Food and Nutrition Security which opened in Georgetown, Guyana in September 2010, Persaud said: “Our continued reliance on food imports, instead of reducing, has actually been increasing. Twenty years ago,Caribbean countries accounted for more than two per cent of the world’s agricultural trade, but that share has declined to less than 0.3 per cent today.
“Our net agriculture trade was surplus then – standing at around US$3 billion. Today we are in a deficit, paying over US$3.5 billion annually to import food.”
Earlier this month, Jamaica’s Minister of Agriculture Christopher Tufton announced that Jamaica had actually reduced its food importation bill, albeit by 1 per cent. Last year, the country’s food importation bill came to US$661 million but this is in the context of Jamaica’s total GDP of US$12 billion. Tufton has made a valiant effort to promote consumption of local produce and he has been assiduously championing the agriculture ministry’s recently launched , “Eat Jamaican Campaign”. He has also been on a concerted drive to increase agricultural production and has been spurring on the farming community.
Three years ago with oil prices at US$147 a barrel, there was also a spike in food prices that saw riots across the world, and here we are again with corn at US$305 per tonne, oil at over US$100 a barrel, coffee up by 30 per cent and wheat up by 70 per cent. In January of this year the United Nations Food and Agriculture Organisation (FAO) Food Price Index rose for the seventh consecutive month to a record high of 231.0, topping its June 2008 peak of 224.1.
According to the World Bank, rising food prices have driven an estimated 44 million people into poverty in developing countries since June 2010. Futhermore, according to the latest edition of Food Price Watch, the World Bank’s food price index rose by 15 per cent between October 2010 and January this year, 29 per cent above the level a year earlier and is only 3 per cent below its 2008 peak.
Closer to home the Bank of Jamaica (BOJ) continues to maintain that inflation will radically decline.The Governor of the BOJ Brian Wynter says that he expects inflation for the full fiscal year to March to end well within his projected range of 7.5 to 9.5 per cent. Last financial year, the inflation figure ended up at 13.3 per cent. Given the current global environment, it is difficult to see inflation continuing to trend downward and come within single digits during the upcoming financial year. Higher oil prices and food price hikes will put paid to that, more so if there is a protracted military conflict in the Middle East.
The government is presently preoccupied with the Manatt Enquiry and a Charter of Rights, but it needs to pay attention to this crisis. It will be hard to ignore the pleas of public sector workers for wage increases with food prices continually spiralling.It must also be made clear that the government is in no position to subsidise food and agricultural produce. It can, however, assist in bolstering the sector although agriculture cannot be considered a major engine of economic growth. The minimum wage in Jamaica is around J$4500 a week, yet food prices have increased by around 25 per cent on last year.
There are those who will point out that consumer prices recorded an overall decline for a second straight month in February 2011, with The Satistical Institute of Jamaica (STATIN) declaring that prices fell by 0.4 per cent last month. The decline was twice as much as the 0.2 per cent dip in prices recorded in January. This fall is attributed to an oversupply of vegetables and starchy foods which outweighed increases in everything else. The price decline means that for the fiscal year to date, inflation is running at 6.7 per cent, which is below BOJ projections.
The Minister of Industry and Commerce Karl Samuda last week said that Jamaican inflation is likely to fall below 10 per cent by the end of fiscal year 2010/11 and economic growth is unlikely to have picked up strongly. ” In 2010 inflation was reduced to 11.7 per cent, a 30 per cent drop. At the end of March we are expecting it to be under 10 per cent. Growth for 2010/11 is going to be fairly flat and that is a challenge we face and have been struggling with now for many years,” Samuda told Reuters.
This being said, there will be lag before the full effects of the Middle East conflicts are felt. It is simply a case of the calm before the storm. At the end of February this year, Samuda called senior officials of his Ministry to a meeting to discuss rising food prices and their impact on Jamaica.