The impact of Covid-19 on international food prices
06 Aug, 2021: The Ministry has noted the discussions in several quarters regarding the impact of COVID-19 on international food prices. According to the Food and Agriculture Organization (FAO) Food Price Index (FPI) food prices are 40% higher in 2021 than they were for the same period in 2020.
During the period July to December 2020, food price inflation averaged 2.5% globally. This was driven primarily by an increase in price of vegetables and vegetable oils recording an average of 7.36% over the July to December 2020 period. This was followed by cereals which registered a price increase of 3.2% during the same period. Over the period January to June 2021 global food price inflation nudged up slightly averaging 2.68% compared to an average of -1.3% over the corresponding period January to June 2020. This was also driven mainly by vegetable and vegetable oil prices increasing by 4.4%, followed by sugar which increased by 3.4% during the same period.
Notably, the increase in food prices during the second half of 2020, onwards into 2021 was due to the rebound in global demand, as countries reopened their economies and lifted their COVID-19 restrictions. Secondly, the increase in prices was attributed to drought and extreme weather conditions in many producing countries, such as Brazil, the United States, Canada and several countries in Europe such as Germany.
More recently a rainstorm in mid-July 2021 caused rivers and reservoirs to spill over their banks, leading to deadly flooding in central China. This and other similar unexpected natural disasters have also led to the recent escalation in the prices of food items precipitated by disruptions to factories and retarded supply chains. It has also affected transportation networks including logistic hubs and service providers which have had a debilitating effect on shipping lines and freight charges globally.
Food Prices Locally
According to the monthly food inflation data from the Central Bank of Trinidad and Tobago (CBTT), food price inflation fluctuated over the period October 2020 to April 2021. Based on the most recent data up to April 2021 there was a general downward trend during October 2020 to December 2020. In January 2021 there was a spike in food inflation followed by a decline in February. However, in March 2021 there was a small uptake in food inflation but this was again subdued in April 2021.
Table 1: Food Inflation (Oct 2020-April 2021)
Month Food Inflation
It is to be noted that the COVID-19 pandemic has led to an increase in food prices internationally and this affected the prices of some food items locally on account of the following international factors:
i. Quarantines, mobility restrictions and physical distancing measures which led to an increase in demand for food and other basic essential supplies;
ii. Significant disruptions in global food supply chains and processing facilities; and an exponential increase in international shipping rates
iii. Worldwide increases in the cost of freight.
The Ministry of Trade and Industry has recently undertaken an assessment of the movement (upward/downward/constant) of food prices over the last seven months (Jan-July 2021). It is acknowledged that the price of several items have increased to varying degrees over this period most notably soya bean oil, peas and beans, garlic, oats and other items. It should be noted that the prices of other items such as toilet soap, powdered milk (full cream/skimmed), infant cereal, frosted flakes, sugar (granulated), white vinegar, tea bags (green), orange drink (1L), Ovaltine, corn flakes, biscuits, soap powder and chicken breast have remained stable while others such as sugar (brown), black eye peas (loose), toilet paper, grapefruit drink, mustard, dishwashing liquid, economy pack (frozen), flour, tomato ketchup, soya chunks, table margarine, dried pigeon peas (loose) smoke herring and chicken drumsticks (frozen), pork stew have decreased.
Government’s Response to Rising Food Prices
Government has been proactively monitoring and addressing rising food prices, as far as possible, through targeted interventions including addressing the supply-side constraints of manufacturers and importers and effective price monitoring mechanisms for selected goods and services.
Financing Support to businesses to Ease Food Inflation
i. Increased Supply of Forex via EXIM BANK Ltd – In order to address the financing constraints faced by manufacturers and importers especially in terms of the availability of foreign exchange to finance imports of basic food, essential items and inputs into the production process during the COVID-19 Pandemic, the Government allocated approximately US$400 million via the EXIMBANK Ltd. through two (2) specific facilities namely, the FOREX Facility for Manufacturers and the Forex Allocation System (FAS). These financing facilities specifically target manufacturers, importers and distributors of food, pharmaceuticals and other COVID-19 essentials and facilitate the importation of basic and essential items into the country thereby preventing any shortages.
ii. Sales of Forex by the CBTT – The Central Bank of Trinidad and Tobago continued to supply Forex to the market. During the period July-December 2020, the average total sale of Forex, including USD, by the CBTT was approximately US$357 Mn while the average total sale of Forex, including USD, for the period January-June 2021 was US$371 Mn. This represents an increase of 4%.
Suspension of the Common External Tariff (CET)
i. Suspension of the CET on Basic Food Items – The Government also pursued the suspension of the Common External Tariff (CET) on a list of over 20 basic food items. These items were approved at the level of CARICOM in accordance with Article 83(3)(b) of the Revised Treaty of Chaguaramas and implemented at the national level for the period 1 January 2021 to 31 December 2021. These items include salted fished and canned fish, cheddar cheese, canned corned beef, frozen french fries, milk and cream, refined sugar, preparations for infant use, soybean and other types of oil for cooking.
The continuation of the suspension of the CET is necessary inter alia to provide support to maintain the price of basic food items at an affordable rate for consumers, as well as to stabilize the cost of living given the current economic conditions.
Food Price Monitoring Mechanism
i. Role of the Consumer Affairs Division (CAD) - In the area of active monitoring of prices, the Consumer Affairs Division (CAD) of the Ministry of Trade and Industry (MTI) is tasked with the responsibility for safeguarding the economic interests of consumers and ensuring the well-being of consumers through several empowerment and protection initiatives. These initiatives seek to ensure that consumers are provided with information to guide purchasing decisions and that consumers have access to an efficient customer complaint redress system, which allows persons to report unfair business practices, which are minimized and discouraged.
The CAD has an effective mechanism for monitoring prices in Trinidad and Tobago through the conduct of monthly and quarterly price surveys of key retail outlets, namely supermarkets, hardware stores, poultry shops and will soon commence surveys of pharmacies. Additionally, the CAD also has a robust outreach and education programme, to educate consumers on their rights and responsibilities.
Specifically, a monthly Retail Price survey is conducted amongst supermarkets across the country. The main intention of this Survey is to monitor the movement of prices of 128 basic food items consumed by households. In a similar vein, prices of building materials such as cement and electrical and plumbing items are surveyed at hardware establishments on a quarterly basis and on a monthly basis the prices of live and processed poultry is captured and published from 35 poultry shops.
A monthly report is published by the CAD via https://tradeind.gov.tt/consumer-affairs-division/ and other social media platforms to inform consumers of price trends across supermarkets, which allows consumers to deduce on their own whether prices for various items of food increased or decreased. The availability of this information allows the consumer to make rational purchasing decisions and undertake comparative shopping.
ii. New Consumer Legislation - A new consumer protection and empowerment legislation is currently being prepared to repeal the existing Consumer Protection and Safety Act, Chapter, 82:34. This new legislation will be more harmonized and effective in enhancing consumer protection and fostering more informed and empowered consumers. The sign of a mature consumer society is the ability of buyers who know their rights and responsibilities as consumers, to exercise such rights and to engage in comparative shopping. The CAD works arduously to ensure that consumers are provided with all the necessary information, advice and support they need to guide them as their purchasing decisions directly affect demand.
Boosting Agriculture Production and Building Food Security
i. Creation of New Economic Spaces for Agriculture and Agro-processing – To develop new economic spaces for agriculture and agro-processing, in July 2020 the Ministry of Trade and Industry launched the Moruga Agro-processing and Light Industrial Park. The Park will facilitate the processing of fruits, fish, root crops, cocoa and peppers and will enhance the manufacturing and agro-processing capacity of local firms through the provision of infrastructure and help boost agricultural production and create value-added exportable products that will reduce the national import food bill.
ii. Strengthen the domestic farm-to-market supply chain - The MTI is also collaborating with the National Export Facilitation Organization of Trinidad and Tobago, exporTT, to facilitate the provision of incentives for equipment for agro-processing, grants via the Grant Fund Facility (GFF). This initiative will assist in the alignment of firms into manufacturing supply chains and will engender a coordinated approach for the engagement of firms along the farm to market supply chain.
iii. Agriculture Stimulus Package - The Government is committed to boosting agriculture output in Trinidad and Tobago. To this end, the Government is currently implementing a $500 Mn Agriculture Stimulus Package. Funding from the Programme will support the rapid expansion in production and marketing of selected high-demand commodities with short production cycles such as vegetables, legumes, roots and tubers, grains, fruits and small livestock. It will also focus on developing adequate quality seeds and alternative feedstock. Land issues (such as land tenure and access to idle state lands) are also being addressed. The Programme will facilitate increased output from the Agriculture sector thereby lowering the food import bill, reducing prices and boosting output of locally produced agriculture in the short to medium term.
The Ministry of Trade and Industry acknowledges with concern that the increase in food prices comes at a time when many households are experiencing economic difficulties as a result of the impact of the COVID-19 pandemic. While these increases are driven entirely by international factors, it is an opportunity to expand our thrust towards increasing local food production which can be assisted by increased demand by consumers for locally produced goods.