Money Can't Buy Me...Food

A few months ago I wrote a short post on the increasing world’s food price (see here). In the past few days however, a few readers have emailed and left comments in my tag-board, asking for my view.

Since I am not currently in Brunei, I really don’t know the extent to which the global food inflation is affecting Brunei. But I’m sure, like everywhere else in the world, Brunei consumers must have also feeling the heat. For the benefit of all (in case someone is not sure why food prices have gone up), there are a few contributing factors:

1. The increase in the world demand for food: Giant countries such as China and India, whose economies have grown tremendously now have put pressure on the world’s food demand. As a result of a higher standard of living (due to the increase in income), the people in these countries now can afford to buy a larger variety of food resulting in increasing prices of wheat, rice, milk etc.

2. Rising input price: The main problem is the oil price. The soaring oil price is affecting the food price mainly in 2 ways. One, it increases the cost of transportation (land and/or sea). Two, it increases the price of fertilizers. When oil price increases, gas price also increases. Gas is needed to produce food fertilizer. Hence, fertilizer’s price goes up, so does the food price.

3. Climate Change: Flood and draught in many parts of the world are affecting the supply of food. When the food supply cannot meet the increasing food demand, then of course prices of food will go up.

4. Other market distortion: If you have never heard of biofuel, then by now, you should. And apparently it is also causing the food price hike. Wheat and corn for example, are now being used to produce biofuel. As a result, their prices have gone up and thus affecting the prices of other food. This problem is further aggravated by the trade policy of the developed producing countries who refuse to allow free trade for these commodities.

So anyone reading this should now understand why suddenly they find food prices have gone up (and it is not solely because the retailers have gone super-greedy, although some may have taken an advantage). I would actually expect for the effect to be stronger in Brunei since Brunei highly depends on imported food and we don’t have any (many) local substitutes. It is worrying really, just a few weeks ago, the Philippines for instance failed to buy enough rice for its inventories as a result of sales restrictions of rice in Vietnam, India and Egypt. Indonesia, on the other hand, warns of an impending unrest due to the rise in the prices of meat and tofu. (A Soft WARNING of rice shortage in South East Asia has been issued! And there is also a danger of a shortage of powdered milk! SO Please BE WARNED).

What can the government do? I DO hope the relevant authorities in Brunei will not just sit and watch and see how it goes. Other government around the world have taken actions. UAE recently has announced its intention to build a six-month staple food reserves, subsidising food and price freeze. Russia and China, have also issued food price freeze.

A list of staple food in Brunei should, by now be constructed. While I don’t expect the government to subsidise ALL food but I do expect some food price subsidies/food security packages are being planned for Brunei’s staple food (in addition to rice and sugar) such as cooking oil, flour, milk, eggs, chicken(?) and other food (Anonymousfoe: I hardly think mayonnaise should be included hehe). And this would be THE time to impose some price ceilings. Otherwise, we may be in a BIG, BIG trouble.

My advise to anyone reading this (as my previous post) is DO NOT WASTE FOOD! And however small your backyard garden is, try to plant some vegetables. You just never know…

Anyway, the Financial Times is an excellent place to get further information and latest news on the soaring food price (click here).

Salaam.