Just when you thought inflationary pressure brought on by rising food prices could not get any worse, comes news that the cost of cooking oil has increased globally and is likely to impact the pockets of local consumers.
The higher prices are likely to have a domino effect with struggling households likely to pay more for the commodity and some businesses being forced to absorb part of the higher costs.
Two weeks ago, the Food and Agriculture Organisation of the United Nations (FAO) reported that the gauge for world food prices went up in January, largely caused by supply-side constraints for vegetable oils.
It also noted that vegetable oils price index led the rebound in January, increasing by 4.2 per cent month-on-month and reversing its December decline to reach an all-time high. Quotations for all major oils also rose.
According to the FAO, palm oil prices were largely underpinned by concerns over a possible reduction in export availabilities from Indonesia, the world’s leading exporter, while soy oil prices were supported by robust import purchases, particularly from India, grapeseed oil prices were pushed up by lingering supply tightness, and sunflower seed oil quotations were impacted by supply tightness and surging global import demand.
Referring to the latest vegetable oil price increase, Boubaker Ben-Belhassen, Director of FAO’s Markets and Trade Division in a statement explained: “Reduced export availabilities on top of other supply-side constraints, especially labour shortages and unfavourable weather, largely pushed vegetable oil prices up to an all-time high. There is a concern the impacts of these constraints will not ease quickly.”
The FAO Food Price Index averaged 135.7 points in January, 1.1 per cent higher than in December.
The index tracks monthly changes in the international prices of commonly-traded food commodities.
The increase in cooking oil is now coupled with global increases in wheat which resulted in the rise of basic food items in T&T, including flour and its related products. All of which have exacerbated the cost of living in T&T.
President of the Supermarkets Association Rajiv Diptee told the Sunday Business Guardian the increase in cooking oil comes as no surprise given disruptions in the global supply.
And there’s very little local businesses can do to mitigate this increase.
Currently, the prices of cooking oil vary according to the brand and even at which business it is purchased.
At S&S Persad Supermarket in Marayo, the cost of Happi Soyabean Oil 500ml is $14.95, the 900ml of the same brand retails at $24.95, while the Lotus Soyabean Oil 1.5L is $ 33.95 and the Lotus Soyabean Oil 3L is priced at $62.95.
And generally, Richport’s 900 ml vegetable oil costs $25.50 compared to Eve’s Soyabean Oil which is $22 for the same amount. Also, Richport’s 1.5L is $41.95 while Eve’s 1.5L is 34.95.
According to Diptee the global demand is still very high making it difficult for supply still to meet demand.
And with the increases in prices he said, this has driven some consumers to instead shop at smaller establishments like shops and parlours because purchasing in much smaller quantities can better meet their pockets.
“When you go to parlours and small shops people are trying to stretch a $100, and out that they have to get flour, sugar, rice and oil; the very basics.
“So the shopkeepers will package these out, to sell in much smaller quantities” Diptee explained. But while this helps, quality control is questionable he noted.
Diptee said the association will be working with entities to bring in goods in more variety of “price points” to assist people meet their food needs.
Checks with some distributors also revealed that they too are concerned about high food prices. “But there is nothing we can do. The cost to bring in a container is high along with other factors. The increase in oil will have an impact throughout because doubles, KFC, cooked food, roti; everything is oil,” one explained.
Earlier this week, the Central Bank warned that higher prices, particularly imported inflation, will pose a challenge to the economy in 2022.
In outlining the outlook for this year in its January Economic Bulletin, the Central Bank said the international shortage of shipping containers, higher shipping costs (freight and insurance) are expected to persist into the early months of 2022, alongside some pressure on prices of international agricultural commodities.
Can Trade Ministry intervene
in high prices?
The Sunday Business Guardian reached out to the Trade Ministry on whether Government can implement specific measures to help curb rising food prices.
According to the ministry, Government has been “proactively monitoring and addressing rising food prices, as far as possible,” through targeted interventions such as the suspension of the Common External Tariff (CET), the removal of VAT and price monitoring mechanisms for selected goods and services.
The Ministry said it has specifically pursued and implemented a suspension of the CET on a list of over 20 basic food items, including soyabean oil, virgin olive oil, sunflower/safflower oil and canola oil.
It also noted the suspension of the CET reduces the rate of customs duty of 40 per cent on these oils to duties ranging between zero and 20 per cent charged on imports as it seeks to stabilise the cost of items for consumers.
The suspension of the CET is currently implemented from January 1, to December 31, 2022.
Further, arising from the fiscal 2022 budget measures, Government also implemented policies in October, 2021 to remove VAT on selected basic food items which also included vegetable, olive and canola oils.
“It was envisioned that through these measures the consumers would benefit from the reduced charges via responsible pricing strategies by the business sector,” the ministry said.
And regarding the active monitoring of prices, the Consumer Affairs Division (CAD) of the ministry has been monitoring and publishing periodical reports on food and other prices to inform consumers of price trends across supermarkets and retail stores, which allows consumers to make rational purchasing decisions and undertake comparative shopping, the ministry added.
According to the ministry information from the CAD’s reports, local retail price of vegetable oils fluctuated between November 2021 and January 2022 mirroring the changes in international oil prices.
However, it emphasized that due to the polices implemented by the Government, the effects “are less disruptive to consumers and businesses.”
Time to revitalize coconut industry?
Agricultural economist Omardath Maharaj said there are regional development efforts such as the ITC Alliances for Coconut Industry Development in the Caribbean to engage small farmers and MSMEs to manage risk and facilitate networks that provide technical expertise, build capacity and target catalytic investment to address systemic challenges.
However, Maharaj argued progress and engagement of T&T in these efforts remains unknown.
He indicated that the Public Sector Investment Programme (2022) mentions the development and provision of facilities at the Government-run Marper Farm and in 2021 included $0.4 million for plots for new and improved cocoa, mango, avocado, coconut, and citrus.
The activities to support this include coconut germplasm plots – procurement of inputs/plants with works to be done in-house.
According to Maharaj the document further notes that one of the major objectives of the Research Division of the Agriculture Ministry is to ensure that the coconut industry continues to have a sustainable contribution to economic activity.
To achieve this, $0.2 million will be allocated for a Coconut Rehabilitation and Replanting Programme to facilitate the ongoing work with technical support provided by experts from Mexico, for digitising pest surveillance programme for coconuts; surveillance of invasive species; acquisition and distribution of superior coconut varieties; and management of important coconut pests including red ring disease and red palm mite.
And while Maharaj said there may be merit to revive the country’s coconut industry especially in the face of rising food prices it will require a lot of work is this is to come to fruition.
For instance, he indicated there remains no cluster development strategy that matches the resources and ideas in agri-entrepreneurship, for example, other factors of production to create critical mass that would attract policy or programme facilitation and market development whether at home or abroad.
Further, Maharaj said although the Intellectual Property Office has been pursuing some level of outreach to emphasize the importance to every one including entrepreneurs and smaller start-ups, T&T remains in a situation of many firms, farmers and interest but little policy direction, technology and innovation.
And consecutive governments, he added, have not invested in the productive capacity of the sector to meet the needs of industry for food processing and manufacturing.
Final data on coconut and processed products produced locally was not immediately available for import comparisons but according to UN COMTRADE Statistics, T&T imported fresh coconuts ($16.5 million), desiccated coconuts ($4.8 million), copra ($14 million), crude coconut oil ($66.7 million) and coconut oil fractions ($23.6 million) between 2013 and 2017.