Weather woes hurt crops, push up prices
Esther Teo Straits Times 13 Aug 10;
A PERFECT storm of bad weather, drought and fires has devastated key crops and harvests across the world and sent the prices of basic food products soaring in recent weeks.
Coffee, wheat, sugar, corn, garlic and soya beans have all been affected although consumers have yet to feel the effects here with suppliers and middlemen willing to take the hit so far.
But if the supply squeeze worsens, prices will stay high or go higher and the flow-on effect will eventually reach coffee shops, hawker centres and supermarkets.
The pressure points are being felt across most of the key food groups and in many agricultural producers.
Wheat prices have more than doubled since the end of June, mainly because severe drought and wildfires in Russia - the world's third-largest producer - have destroyed up to a fifth of the country's crop. Rain has also cut Canadian output while dry weather in Kazakhstan and Ukraine has brought poorer harvests.
Sugar prices have surged about 30 per cent in three months, due to heavy rain in Brazil and India, while corn is up 7.8 per cent over the same period and soya beans are 8.3 per cent more expensive.
There is speculation that Russia - the world's third-biggest sugar importer - will boost purchases as the worst drought in at least half a century damages sugar beet crops.
Floods in China and rising seed costs have also limited the supply of garlic. China is the world's top producer, accounting for 77 per cent of global production.
Coffee hit a 13-year high last month with prices shooting up by 21 per cent since the beginning of this year, according to London-based International Coffee Organisation. Its average price last month of US$1.53 per pound was the highest monthly average since June 1997.
Unusually heavy rainfall in Brazil and Indonesia has damaged coffee bean quality. Indonesia's main harvest is being brought in only now after a delay of three months as rain made it tough for coffee cherries to ripen. Farmers have also struggled to dry beans because of a lack of sunshine.
The high prices are bringing some pain to suppliers and other middlemen but they have not fully trickled down to consumers here yet - though that could just be a matter of time.
Singapore Food Manufacturers' Association deputy president Wong Mong Hong said the drastic rise in wheat prices would probably impact Singaporeans the most as the commodity is used in a wide variety of items, including noodles and bread.
But price rises in other goods will be felt only 'marginally' as middlemen might temporarily absorb any increased cost. Suppliers also usually keep up to four months of stock, he added.
'Some firms might already be gradually passing the cost down to consumers... It depends on each firm and it's hard to say when exactly increases in prices might happen,' Mr Wong added.
Last week, Prima, the largest wheat importer here, said it plans to raise flour prices gradually and in phases as the price surge has had a 'definite impact'.
Mr Hong Poh Hin, chairman of the Foochow Coffee Restaurant and Bar Merchants Association, said that most coffee shops were still holding prices steady.
Suppliers usually buy on future prices for about six months to a year. It will be only in the next three months when some start buying new batches of coffee that they might be faced with higher costs and in turn pass them on to consumers, he said.
Sheng Siong Supermarket said it 'tries as much as possible not to pass any increment in costs to our customers', said a spokesman. 'Any retail price increase would be a last resort.'
NTUC FairPrice also said that its supply and prices of essential items remain relatively stable due to its policy of forward buying and diversified sourcing from all over the world.
Mr Tng Ah Yiam, managing director (purchasing, merchandising and international trading) at NTUC FairPrice, said: 'In the event that our suppliers choose to increase their prices, FairPrice will check to ensure that the increase is reasonable.'
Nestle Singapore said it does not plan to raise the prices of its wheat- and corn-based breakfast cereals while Jollibean Foods said that it would keep prices unchanged despite the increased cost of its ingredients like soya beans and wheat flour.
Mr Thomas Pek, managing director of Tai Hua Food Industries which manufactures soya sauce, said that despite a 10 per cent increase in soya bean prices, he would be keeping the cost of his product unchanged.
'If we can survive, we won't increase the price... unless it is really very tough for us. We are making a widely-used consumer product and it is our responsibility to society to maintain prices if possible,' he said.
Mr Irvin Seah, an economist with DBS Bank, said many suppliers were reluctant to increase prices given the highly competitive food industry here.
However, with the convergence of higher wages, rent and raw material costs, suppliers or manufacturers would be hard-pressed not to raise their prices, he said.
'All factors point towards higher food prices, it's just a matter of time... The recent surge in commodity prices might result in an added squeeze, providing the impetus for suppliers to raise prices.'
Mr Abah Ofon, StanChart commodities research analyst for global markets, added that as a rule of thumb, it would take three to six months of sustained high prices before these feed through into higher retail prices.
However, he said the wheat market had reacted in knee-jerk fashion despite ample supplies. Global corn and soya bean stocks are sufficient as a large harvest in the Americas should dampen upside momentum, he said, adding sugar and coffee prices should also moderate as the season progresses due to significant improvement in global production.
The Government said on Tuesday that surging wheat prices have yet to make a significant impact on prices here as the Russian wheat crisis was only a temporary hit to supply and that Singapore's sources of food imports are extremely diversified.
Wheat: Prices have surged 50% since June
PRICES have shot up around 50 per cent since June, the most dramatic rise in more than 30 years, and bread, pasta and breakfast cereal all look likely to become more expensive.
Drought and fires in Russia and heavy rain elsewhere have devastated harvests, sending the price of a bushel from about US$4 two months ago to US$6.34.
In Singapore, major flour supplier Prima has already warned that it will increase prices gradually, although it imports wheat mainly from Australia, the United States and Canada.
However, a recent HSBC report said that global stocks of wheat are far higher today than during the last food price scare of 2007 and 2008, with about 528 million tonnes in reserve, compared with 427 million tonnes when the price of the grain soared above US$12 a bushel.
Coffee: Prices jump 20%
PRICES have surged about 20 per cent to around US$1.53 per pound in three months, due largely to unusually heavy rain affecting harvests in Brazil and Indonesia.
Vietnam - the world's second-largest coffee producer after Brazil - has also had poorer harvests.
Indonesia's main harvest has been delayed to June-August from March-May as rain affected ripening while farmers have had trouble drying beans because of a lack of sunshine.
The International Coffee Organisation (ICO) said world exports between October and April dropped by 8.1 per cent compared with the same period a year earlier.
Industry players say higher prices are unlikely to feed through to supermarket shelves immediately as retailers and cafes wait to see if the situation improves.
Mr Melvin Seah, general manager of Hui Yee Coffee Manufacturer, said that although the cost of coffee beans has risen by about 10 per cent, his firm is absorbing the increase. 'Prices now are very volatile. If there is another 10 to 20 per cent hike in coffee prices, then we'll definitely have to consider increasing our prices.'
Soya: Prices up 8%
PRICES are up 8.3 per cent in three months due to wet conditions in Iowa that have put key crops at risk.
The mid-west American state produces nearly 20 per cent of the total US corn crop and 15 per cent of its soya beans.
In India, a lack of rain in vast parts of the growing area of Madhya Pradesh has also hit harvests.
Mr Thomas Pek, managing director of Tai Hua Food Industries, which manufactures soya sauce, said he will keep the cost of his product unchanged.
Jollibean Foods will also keep prices of its soya-based products like soya milk unchanged for now.
Sugar: Prices rise 26% in 3 months
SUGAR is not looking as sweet after prices surged more than 26 per cent over the last three months.
Heavy rain has disrupted shipments from top producers Brazil and India, leaving ships waiting outside the ports.
There was a record number of ships lined up outside Brazil's ports as they were forced to stop sugar loading because humidity ruins the product.
Meanwhile, devastating floods in Pakistan and the severe heatwave in Russia have disrupted sugar beet harvests and are likely to send imports up, putting a further squeeze on sugar supplies.
Prices on the sugar spot index have risen from 19.12 US cents a pound in May to 24.16 US cents.
Most of Singapore's sugar comes from Australia and Thailand, while about a fifth comes from Malaysia.
Sheng Siong Supermarket said that despite higher global sugar prices, it has kept retail prices the same.
REPORTS: ROBIN CHAN, ESTHER TEO
Chinese herb prices soar following China natural disasters
Ng Lian Cheong and Sharon See Channel NewsAsia 12 Aug 10;
SINGAPORE: Natural disasters in China have disrupted the supply of Chinese herbs, causing prices to go up.
Changbai Mountain Ginseng, Pseudostellaria (Tai Zi Shen), Herba Lophatheri (Qi Zhu Ye) and dried Prunella (Xia Ku Cao) are some of the popular Chinese herbs among consumers here.
But their supply has been disrupted lately with farms wreaked by natural disasters in China.
A supplier said prices for the majority of herbs have gone up by 10 to 80 per cent.
Given the current situation, some farmers are also reluctant to sell what they have.
Suppliers said they would try to absorb the increased cost as much as they can, before passing it on to consumers.
-CNA/wk
