what's the real story?
High food prices have had the biggest impact on headline inflation, posing a seemingly intractable problem for successive governments. Reality is that this country imports 80 per cent or more of the foods we consume, much of it staples. As such, the slightest movement of prices of commodities such as wheat, maize, rice, dairy products, meats and oils and fats have an almost instant, and often unexplained, impact on local prices.
In the most recent example, severe drought in the "corn belt" in the USA drove maize futures prices upwards. There were fears of production shortfalls in the biggest maize-exporting country in the world. Trinidad and Tobago imports approximately 50,000 tonnes of maize a year, mainly for livestock feed. Immediately, local egg producers announced increased prices for their products. Eggs are a staple in people's daily food consumption.
On September 6, the Food and Agricultural Organisation (FAO), in its Food Price Index update, noted, "Deteriorating crop prospects for maize in the United States and wheat in the Russian Federation initially underpinned export quotations, but prices eased towards the end of the month, following heavy rains in areas hardest hit by drought in the United States..."
In other words, maize prices stabilised, even retreated, by late August. Did local egg producers withdraw their price hikes? Not that we are aware of. And therein lies a challenge that Government may want to meet head-on. High food prices, especially among staples, hurt everyone, but the most vulnerable in society are hardest hit. While there are no longer regulations for controlling prices, there ought to be mechanisms in place for monitoring price gouging and other unfair practices. Indeed, there is a Consumer Affairs Division at the Ministry of Legal Affairs, but we do not know if its remit extends this far up the food chain.
Last week, a major importer and distributor of foods told the media he had written Finance Minister Larry Howai asking that he "remove duties and VAT from certain staples in order to lower food prices". On checking, we discovered that all the commodities the importer mentioned are zero rated for VAT purposes, and there was no evidence that Customs duties have been imposed. What's the real story behind his claims?
We cannot dispute the fact that food prices have increased over the past decade, posing a major challenge to food-importing countries like ours. The FAO Index, which monitors on a monthly basis the price movements of five major food commodities, and uses the year 2000 as its base (100), stood at 213 in August. It had peaked at 238 points in February 2011. Food, therefore, is expensive, and not surprisingly, the main driver of inflation.
There has been much talk by governments about promoting greater food security by boosting local food production in order to reduce our dependence on imported foods. In large measure, they have failed. We could hardly produce substitutes for our main imports-wheat (67,000 tonnes a year), dairy products (25,000), maize (50,000), edible oils (15,000), rice (28,000) and beef (4,000), to name only the main products.
Over the past decade or so, especially after the closure of the sugar industry, successive ministers responsible for food production have vowed to lower the annual $4 billion food import bill by stimulating local initiatives. We have had mega-farms, two-acre farms, ponds, access roads, subsidies, easier credit and more. Simultaneously, food producers have complained about insecurity of tenure, crops being bulldozed, poor marketing options and competition from "dumped" imports.
Ironically, the last time this country came close to self-sufficiency in food production was during the Second World War (1939-1945). Then, we had to produce or starve. More importantly, we had to consume what we produced and minimise dependence on imports that was risky business.
Surely, the global food crisis should serve as a war-like stimulus to drive the food-importing Caribbean, as a region, towards fast-tracking food security.