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Thursday, April 24, 2008

Trinidad Express: Caught up in Consumerism

From today's Express, a letter by Stephen Chan. Echoes of the 1980's?

There are many contributing factors to inflation, but the root of the problem is that demand far outweighs supply.

But when you examine the situation objectively you should be able to see major contributing factors, such as huge tax cuts, our ever-increasing laziness. And what about our increasing demand for all things foreign?

If you do some simple mathematics you should be able to account for approximately $800 million in increased consumer spending over a two-year period.

This is a direct result of reducing taxation on the vast middle class. If you couple this with the induced need for a majority of foreign products one can see where local industry has suffered because of increased imports.

Maybe Mr. Robinson had it right when he implemented a black list. Back then we did well without apples, grapes and Kelloggs. The question is, once we have experienced these imported guilty pleasures can we go back to doing without them? Can we go back to paying $800 million in tax? Can we do without cable TV and the various foreign icons of consumerism? Maybe we can, and as a bonus we can win back our children as well, because there would be no more foreign wayward children on the television for our own children to want to emulate.

Stephen Chan

San Juan

Saturday, April 05, 2008

Raffique Shah: Reasons for runaway food price$ in T&T

As usual, reasoned and reasonable, Raffique Shah writes in Wednesday's Express - prior to the viral "the real increase in the price of doubles is 5 cents" email - on the reasons that food prices are increasing globally.

The journalist and agriculturalist synopsizes much that has been written and said by commentators all over the world, and puts the topic into local and regional context.

As always, he's a good read and I'll try to pick up his continuation to this article in the week ahead.
If anything, the announcement last week by the National Flour Mills (NFM) that flour prices will rise up to 39 per cent, should sensitise people to the gravity of the food crisis that faces the world.

The unbridled, and, for us, uncontrollable rise in basic food prices, are compelling reasons why tropical countries that do not produce wheat should look to cassava and corn flour as viable alternatives.

Countries like Trinidad and Tobago need to produce more of what we eat, and eat more of what we produce.

The cassava flour initiative by the TTABA is one small step in this direction.

The flour can be used by itself for making a range of edible substitutes for wheat flour dishes. Or, as is more often the case, it is blended with wheat flour to enable consumers to enjoy the best of both crops.

While a mix of ten per cent cassava flour with 90 per cent wheat flour is seen as standard in countries where consumers have developed a taste for the latter grain, experts postulate that the mix can be 30/70, thus further cutting costs of skyrocketing wheat.

If consumers need a kick in the palate to understand just how serious the food crisis is, and why there is an urgent need to alter our basic food choices, current and projected wheat prices ought to do the trick.

In 2004, this country bought 240,000 tonnes of the grain at an average price of US$190 per tonne.

That cost us US$26.5 million.

Today, high quality "spring wheat" prices hover around US$800 per tonne.

A recent Financial Times article stated: "Spring wheat at the Minneapolis Grain Exchange surged an unprecedented $4.75 to a record high of $24 a bushel (60 pounds) as consumers scrambled to secure supplies and speculators poured fresh money into the agriculture market."

Other, lower quality wheat prices stand at around US$360 per tonne, almost a 100 per cent increase from 2004.

The Christian Science Monitor reported last week: "Flour manufacturers are raising prices by at least 30 per cent or more. Since the beginning of the year, bread in t he supermarket has risen anywhere from ten to 30 cents a loaf. Wegmans, a grocery chain based in Rochester, NY, says it has raised prices on packaged breads from ten to 50 cents."

What both these reports spell out is that the price of the staple we cannot do without, wheat flour, has risen by 400 per cent.

Moreover, supplies are short for many reasons (bad crops in countries like India and Pakistan, un-seasonal weather affecting huge swaths of the US grain belt).

In her 'case for cassava' paper, TTABA's Omaira Rostant projected annual savings of around US$15 million through usage of ten per cent cassava flour.

Now it seems prudent to look at the "30 per cent" mix, which will mean savings of US$60 million and upward.

Another commodity that is competing with wheat in so far as price increase goes is rice. Here the story is similar, according to the Times report: "In Asia, where rice is on every plate, prices are shooting up almost daily. Premium Thai fragrant rice now costs $900 per ton, a nearly 30 per cent rise from a month ago."

Trade and Industry Minister Dr Keith Rowley, said at last Thursday's Cabinet media briefing that Guyana, our prime source for rice, has indicated, not surprisingly, it intends to raise its rice prices.

A similar pattern holds true for our other 'big ticket' imported foods. Among these are (in metric tonnes with 2004 unit prices in US dollars, and current prices where data is available):

- Soybeans: 75,000 at $342,

now around $470

- Sugar: (raw for processing into white sugar, some exported to Caricom countries): 84,000 at $250, now around $220

- Cheese: 7,000 at $3,000,

now around $3,700

- Dry whole milk: 6,000 at $2,600,

now around $3,000

- Maize: 112,000 at $139, now $180

- Rice: 70,000 at $300, now $340

- Soya Oil: 13,000 at $750, now $800

- Beef: 4,000 at $2,500

What the galloping increases in prices of these commodities indicate is there will be no let-up on consumers' pockets.

Commenting on how these will affect people worldwide, The Economist stated: "According to the International Grains Council, a trade body based in London, this year's (2007) total cereals crop will be 1.66 billion tonnes, the largest on record and 89m tonnes more than last year's harvest, another bumper crop. That the biggest grain harvest the world has ever seen is not enough to forestall scarcity prices tells you that something fundamental is affecting the world's demand for cereals.

"One is increasing wealth in China and India. This is stoking demand for meat in those countries, in turn boosting the demand for cereals to feed to animals. Higher incomes in India and China have made hundreds of millions of people rich enough to afford meat and other foods. In 1985 the average Chinese consumer ate 20kg (44lb) of meat a year; now he eats more than 50kg. China's appetite for meat may be nearing satiation, but other countries are following behind: in developing countries as a whole, consumption of cereals has been flat since 1980, but demand for meat has doubled."

Trinidad and Tobago is a meat-crazy country.

The biggest 'cut' is in poultry, which we produce on a large scale, so much so we are self-sufficient.

But even the poultry industry is susceptible to grain price increases since all feeds are based on imported grain.

Our beef stock has dwindled over the years, and with consumers increasingly developing a taste for high-end beef, lamb and pork, we remain at the mercy of rising global demand for these meats.

"Calorie for calorie, you need more grain if you eat it transformed into meat than if you eat it as bread: it takes three kilograms of cereals to produce a kilo of pork, eight for a kilo of beef," according to The Economist. The other factor that has impacted on food prices is the massive drive, worldwide, to convert grains and other crops to fuels. Biofuels have siphoned huge amounts of foods. "In 2000 around 15m tonnes of America's maize crop was turned into ethanol; this year (2007) the quantity is likely to be around 85m tonnes. America is easily the world's largest maize exporter-and it now uses more of its maize crop for ethanol than it sells abroad.According to the World Bank, the grain needed to fill up an SUV would feed a person for a year."

The Economist concluded: "In other words, were food prices to stay more or less where they are today, it would be a radical departure from a past in which shoppers and farmers got used to a gentle decline in food prices year in, year out. It would put an end to the era of cheap food. And its effects would be felt everywhere, but especially in countries where food matters most."

Dr Rowley, at the media briefing, alluded to a serious decline in grain stocks. On March 11, 2008, the USDA reduced its estimate of 2007-2008 US ending stocks from 272 to 242 million bushels, the lowest in 61 years.

The result is a US ending stocks to use ratio at ten per cent.

Worldwide, the USDA is expecting 2007-2008 ending stocks to fall from 125 to 110 million tons, or 18 per cent of annual use.

With such a bleak picture of the future of food prices, and given Trinidad and Tobago's heavy dependence on imported foods, there are many more reasons why we should stimulate local food production.

More than that, people will need to make choices about what they eat.

Cassava flour, which is but one of scores of alternatives to wheat flour, is one small step in the right direction.

There are many more-corn, pigeon peas, other root crops that provide carbohydrates, local fruits, and the food we are most competent at growing, vegetables.

Next week I shall revert to focusing on how we can fight-and win-the war on high food prices.

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