Why your chicken rice just got pricier

Elysa Chan, The Electric New Paper 13 Nov 07;

A dash of global oil politics, a pinch of inflation and a topping of higher production costs has resulted in a pricier plate of Singapore's favourite local dish

WHAT do the price of corn in Malaysia and oil in America have to do with your chicken rice?

Or for that matter, your shrinking bowl of meepok at the food court?

More than you realise.

It is not merely due to the fact that chickens have become more expensive. Or how the price of wheat affects the price of noodles.

It's a whole host of other factors that add up to such price-rise fears that at least one MP will raise the issue in Parliament today.

Sure, ERP is up. So are petrol prices. But when it hits the stomach in a country of foodies, it's like a blow to the gut.

Take that plate of chicken rice: What used to cost $1 at Mr Tam Hwa Joon's chicken rice stall in Tampines now costs $1.20.

Mr Tam said the cost of buying poultry from his wholesaler increased from $3.50 to $4.10 for 1kg.

CHICKEN FEED

The price of corn, the main ingredient in chicken feed, has gone from $420 to $820 a tonne, triggering a 20 per cent hike in the price of fresh chicken, said Poultry Merchants' Association secretary Chew Kian Huat.

He added that corn prices worldwide are at a high because of increasing demand for grain from the biofuel industry.

News reports also attributed high corn prices to rising demand from developing countries, rising populations around the world, and a shortage in supply due to frequent floods and droughts.

As for oil, the cause is a combination of political instability in the Middle East, the surge in global oil consumption and worries about tight global energy supplies.

Oil prices, which hit a high of US$96 ($139) this month, are also adding to the costs of importing and transporting chicken.

Now that bowl of noodles: The Singapore Noodles Manufacturers Association recommended raising prices by 20 to 30 per cent earlier this month.

Why? Flour, which is used to make noodles, has gone up from $15 to $22.50 per 25kg.

The price rises will be the subject of some debate in Parliament today.

Madam Halimah Yacob, MP for Jurong GRC, who heads the Government Parliamentary Committee for Health, will be asking the Minister for Trade and Industry whether the Ministry is monitoring the increase in prices of food items, such as flour and chicken, and how these price increases and the impact of rising inflation will affect consumers.

Non-Constituency MP Sylvia Lim, chairman of the Workers' Party, intends to ask if the increase in the cost of living is a cause for concern, and whether the GST hike of two percentage points, implemented in July, contributed to the higher costs.

Prime Minister Lee Hsien Loong said yesterday that the Government is helping Singaporeans cope. This meant ensuring 'that the low income are able to pay for their necessities, able to earn a living, able to have a house over their heads'.

INFLATION

Is there a reprieve in sight? At least one economist, Citigroup's Chua Hak Bin, has projected that inflation will hit 4 per cent in the first half of next year.

It now stands at 2 to 3 per cent. If he's right, the Chinese New Year celebrations could be costlier.

Already, poultry mechants are talking about price rises well into next year.

Justifying the increase in the price of fresh chicken, the Poultry Merchant's Association's Mr Chew said: 'For 30 years, the price of chicken has not increased much, compared with prices of beef, pork and mutton.'

He warned that chicken prices may increase even more, especially towards the Chinese New Year period.

But there are some, like Mr Darren Toh, who will try to buck the trend by finding new ways to cut costs.

Mr Toh, whose company processes chicken, is now buying chicken for $3.30 a kg compared with $3 a kg previously. He buys his fresh chicken from an importer, Lee Say Poultry, which brings the chicken in from Malaysia.

He will try to cut on transport costs by encouraging his retail customers to collect the chicken themselves.

But that would raise another question: Will the retailer then justify charging more by blaming petrol, transport, ERP charges, parking and a whole host of other costs increases?

Pricier bowl of noodles and signs of two Singapores
Lee Siew Hua, Straits Times 13 Nov 07

RISING food prices have led to pasta protests in Italy. And there's been turmoil over tortilla in Mexico, where the flat corn bread is a vital source of cheap calories for the poor.

In Singapore, thankfully, concerns over food costs and inflationary heat are not boiling over. This was reflected in the measured-to-muted discourse yesterday in the House, which heard reassurances from the Trade and Industry Minister.

First, Mr Lim Hng Kiang took his colleagues on a quick global tour of the situation. The rising prices of grains, vegetables and milk are bound to global factors, including bad weather in food-supplier countries like Australia and Indonesia.

Also, booming China and India are on a hungrier quest for farm products.

And the focus on biofuels as a petrol alternative is diverting precious acreage from the cultivation of corn. Corn is used in animal feed. In turn, chicken and dairy prices have climbed here and globally.

A very tiny non-food producer like Singapore, relying on so many outsiders, is tangled in this worldwide web of price accelerators.

People feel the pinch here, unless you barely glance at price labels. So Mr Lim took the wise first step of establishing the global picture.

He went on to unpack the inflation issue piece by meticulous piece.

In essence, he said, the policy of gradually strengthening the Singapore dollar reduces imported inflation.

Also, the rip-roaring economy both spurs costs and mitigates their impact.

The bright side is that more Singaporeans are enjoying higher wages after seven years of rather suppressed salaries, he indicated.

Importantly, their pay is underpinned by productivity, so Singapore is competitive.

But inflation is set to rise and may surge to 4-5 per cent in the first quarter of next year.

It should taper off by the second half of next year to more normal conditions, he said.

Let's hope his projection is spot-on.

On the corporate side, there is still some agitation over business costs and competitiveness and the prospect of an overheating economy - amid merriment over profits.

At a deeper social level, the question of how the income gap will affect social cohesion does not go away.

Inflation has a more painful impact on the lowerincome, as a higher proportion of their pay goes to food. Last week, the Food and Agriculture Organisation warned that sustained high food prices can trigger unrest, in Yemen and elsewhere.

Foreign Minister George Yeo discussed social cohesion compellingly when he spoke of 'two Singapores' recently.

While he did not say 'income gap', he observed that there is a group of Singaporeans, not an insignificant number, who cannot tap into the opportunities of globalisation.

'If we become two Singapores, there will be resentment, there will be opposition to doing the right things and we would not be able to seize the new opportunities.'

Many policies are now directed to prevent the two-Singapore scenario: CPF reform, the subsidising of work for older, lower-skilled Singaporeans, educating the young to their full potential and job retraining, he noted.

Anecdotally, there are signs of an emerging dual Singapore. A friend once discouraged his masseuse from her hopes of becoming a yong tau foo seller. It'll be tough to retain stall assistants in a tight labour market, he cautioned.

Not to worry, his masseuse responded. The top 10 per cent of Singapore's middle class has made it to the upper class. But the bottom 10 per cent of the middle class has slipped into the low-income group and it will be her source of workers, she reasoned.

She isn't an economist, but she's alert to income inequities.

Another friend thinks there will invariably be two Singapores, just as there are two Londons or two Tokyos. Japan is the more sobering case, having been defined by a large middle class for years.

But, my optimistic friend says, do not discount the power of aspirations. Parents aspire that their offspring do better and that keeps them going.

The income gap is not over-worrying, if all are still advancing. But what if social mobility is limited?

Will we approach the reality in the United States, where studies show that the level at which Americans begin life mostly determines where they end up?

An imbalance between rich and poor is the oldest and most fatal ailment among all republics. The Greek historian Plutarch said that 2,000 years ago.

Is he another worrier?

On Sunday, Prime Minister Lee Hsien Loong also tackled worries over costs when he said Singapore has the basics right: housing, education, jobs, affordable necessities.

If Mr Lee and Mr Lim have calculated right, the economy will grow even if the issue of costs persists in some form. So most of us will still afford the pricier bowl of noodles. There will be grumbling, but no noodle revolt.