Surges in the production cost of basic foods and rising demand continue to push food prices up the world over and businessman Robert Badal says the long-term solution for Guyana is to expand production of grains and other commodities like soya beans.
West Watooka Linden farmer Agreyam Adams depends on his farm for his livelihood but he said in recent months he has experienced severe increases in the input costs. He told Stabroek News that the price of fertilizer has increased and so too the cost of chicken manure he uses as compost for his vegetables. Adams, a farmer for almost 15 years cultivates pak choy, cucumber, boulanger, cabbage and other cash crops and citrus fruits on his 5.6-acre farm.
He said in past years one bag of chicken manure cost $35 but a similar-sized bag now costs $200 and the manure is not in ready supply. Adams explained that a nearby source of the manure, the Surapana Farm at Mackenzie, is now closed so he now has to traverse the Linden Highway to obtain the dung. He said he does not know why the cost of manure has increased. “Demand for the vegetables is very great,” Adams said, but the high input costs and the adverse weather is affecting his supply. He said the constant rainfall in the mining town has caused a lot of losses for him. Some vegetables had stunted growth and some did not grow at all.
While rainfall in January is expected, over the years the weather pattern has changed and the dry periods are becoming harder to predict. Currently, South America is experiencing the La Nina weather phenomenon which is contributing to high levels of rainfall in some parts and drought in others. Adams said at his farm, “it is not an irrigation problem neither a drainage problem,” but the frequent rainfall compacts the clay soil and causes the water to stagnate above the soil. The man said he hopes to expand his production but he contends that he will need to boost his labour force and is seeking the finance to do so. Adams told this newspaper that he also does construction work to supplement his income. “If…I was not doing farming it would have been real hard,” he said, adding that he would not have been able to buy certain things.
The input cost of stockfeed has doubled over the last six months, one producer told this newspaper, and this may explain why Adams is facing increased cost for the chicken manure. Managing Director at Guyana Stockfeeds Inc Robert Badal said grain prices are “very expensive.” He said in six months the costs for a shipment of rice, soya and corn have doubled and the other ingredients used to produce stockfeed have also increased. As a result feed prices were increased by 15% this year Badal said and increased feed prices means that meat and egg prices will increase.
This company which also sells packaged rice under the Angel brand has increased the price of milled rice by 15%. Due to the high price of corn – local stockfeed producers would use a quantity of rice in the feed as a substitute and this has put pressure on rice supplies locally. In addition, there is increasing demand for rice overseas as adverse weather continues to affect crops.
A CNN broadcast on Wednesday said that rice prices were at 20-year highs and were up 50% in the last year, citing Asia. Rice is used as a staple grain by more than half of the world, the report said. In Guyana a bag of white rice has almost doubled and it is at between $4,000 plus and $5,000 from $2,700 last January and a bag of brown rice is now $6,000 plus from around $3,600 a year ago. CNN also said the poor weather in India and Vietnam has affected production, noting that rice now enjoys an export price of US$500 a tonne. An Asian analyst predicted that the price could reach US$900 to US$1,000 per tonne.
For Badal the long-term solution to these rising input costs is for the country to produce its own grains. “I think Guyana can grow more of its grains, corn and soya,” he said, noting that the country has the available land for this. Once corn and soya are produced here it will ensure grain supply for feed production he said. Badal said too that the grain production locally for feed is on a small scale and the quality will affect feed production, if used. Guyana Stockfeeds currently imports grains from the US, where a strong demand for corn to make ethanol (fuel) has greatly contributed to the high cost.
A report titled ‘The end of cheap food’ in the December 8-14 issue of the Economist said last year that bio-fuels were expected to take a third of America’s record maize (corn) harvest. The report noted that this affects food markets directly. For example, it was posited that ethanol fuel for an SUV tank, according to the World Bank requires as much corn as it takes to feed a person for one year. The 30 million tonnes of extra corn going to ethanol last year amounted to half the fall in the world’s overall grain stocks, the report said. And with the world moving toward green fuel, this situation is expected to be compounded.
Buying bread and flour
Effective March 1, the government included flour on the list of zero rated items but not on wheat, which makes flour. The National Milling Company of Guyana (Namilco) complained that flour was being dumped on the local market and, in the light of the new zero-rating of flour it has decided to increase the cost of flour by 16%. Managing Director Bert Sukhai said this was being done in order to offset expenses from rising wheat prices. This decision did not go down well with the Guyana Revenue Authority which felt that the VAT relief should have been passed on to consumers. Namilco sells a bag of flour wholesale for $5,955 while the imported brand is being sold for $5,700 retail. In December 2006 a 45 kg bag of flour cost more than $4,000. Sukhai said the decision to increase the cost was to ensure that flour prices will remain stable.
Consumers will not be enjoying cheap flour in the near future as investors continue to buy wheat, traded in US dollars to take advantage of the weak dollar, coupled with rising demand in India and China for the commodity and record low wheat stocks. Sukhai said too that an increase by at least 25% would have offset the rising prices of wheat. He said the packaged 1 kg flour has seen a drop in the retail price from $157 VAT inclusive to $150 from March 1. He said there is currently a shortage of wheat in wheat producing nations, the US and Canada, and that wheat prices have reached as high as US$1,200 per tonne. Sukhai said that the last quotation he had for the commodity was US$900.
Last month American Spring Wheat saw a 22% increase in price after big wheat exporter Kazakhstan imposed export tariffs to maintain supplies at home. Russia and Argentina have also imposed export restrictions on wheat. Additionally, extreme weather has already damaged crops in other parts of the world and US wheat inventories are expected to fall to their lowest in 60 years. A BBC report on Monday said that wheat prices were up 350% on the world market over the last five years.
Governments taking action
Apart from the named countries, others have implemented restrictions to keep prices stable. Thailand has already regulated its rice prices to maintain stability. And while the local agriculture ministry has taken some action to sell rice below market price, consumers are still grappling with increased rice prices. Countries such as Argentina, Morocco, Egypt, Mexico and China have imposed food-price controls on domestic prices, the Economist said while a dozen countries including India, Vietnam, Serbia and the Ukraine have imposed export taxes or limited exports. Taking even further steps, the United Arab Emirates on Thursday instituted a price freeze on a wide range of items in a basket of goods. The Gulf News reported that the Ministry of Economy froze the cost of 16 basic food items at the Union Cooperative Society under an initiative to stabilize food prices and reduce inflation. These items include vegetable oil, rice, flour, eggs, sugar, powered milk, long-life milk, tea, Indian mutton, Australian beef, chicken, fish, Arabic bread, sliced bread, beans and lentils. Under the terms of the memorandum the cooperative will outline and implement a programme to preserve the prices of the 16 commodities throughout 2008.
Caricom has also made a move to bring some relief to the region with some countries including Guyana receiving concessions to import teas and juices without the Common External Tariff (CET). At the 19th Inter-Sessional Meeting held in The Bahamas from March 7-8 12 Caricom heads decided to suspend the CET on some 40 items; some for a period of two years and on others, a period of six months, to ease the burden of the cost of living on consumers. The 40 items were compiled from the list submitted by the various countries.
For Guyana, the two-year list of suspension includes baby formula, cheddar cheese, apple juice for infants available for retail sale, tampons, green tea (fermented and not fermented in immediate packing, black tea (fermented) and partly fermented, in immediate packing and other black tea. The six-month CET relief items include imported grape and grapefruit juices for infant use. How much impact this will have on the food basket, in Guyana’s case is not clear, since consumers readily crave imported items such as milk, oil, flour and peas and beans, more than teas.
Barbadians may be seeing some real relief since their list include, according to reports, baby formula and juices for infants, baking powder, corned beef, cheddar cheese, deodorants, vegetable oil, various steel products, canned tuna and sardines, tea, condensed milk, beef (fresh, frozen and minced), pig trotters, breakfast cereals, razors and razor blades. The items sourced from the agricultural sector will be given a six-month suspension which will be reviewed at a later date, and the others including steel and cooking oil will stand for two years, reports say. Countries seeking to add items to their list from the list of 40, that do not form part of the original list submitted by that country, have until April 4 to do so. It is not clear if Guyana intends to add any other more essential food items to its list.
A BBC report on Tuesday noted that United Nations Secretary-General Ban Ki-moon warned that the rising food prices would hinder progress towards the realisation of the Millennium Development Goal which aims to halve extreme poverty by 2015. Global food prices rose by 40% in nine months and food reserves are at their lowest for 30 years. Organizations like the World Food Programme, that give food aid to the world’s poor is facing a US$500M or 284 million pounds shortfall in its attempt to feed 73 million people this year.
