Thursday, April 03, 2008

Rocket Food

If there is one constant nowadays, it is that food prices are constantly on the up and up. We have seen prices at Foodcourts rise by at least 10 cents - 50 cents is the norm. And uncooked food from the neighbourhood provision shops to even discount supermarket retailer NTUC Fairprice, have risen over the last couple of weeks. What next? The public bus and train companies? Very likely, given that the price of oil has hovered around US$100 / barrel for some time now. I see no reason why our public transportation providers would not ask the PTC for an increase, and why the PTC would say no.

We are uneasy probably because we have not experienced significant inflation on this scale and at this extent for some time now. Many may not have been around in 1973, but I remembered my parents tightening the household expenditure belt and my mother started working part time to supplement the household income. Of course, at that time, OPEC's decision to raise oil prices was a significant factor contributing to the inflation. It was totally unnecessary. It was politics. But we weathered that storm.

This time around, it is food production, or lack of it, that is causing the supply problem, or so we are led to believe. It is said that China and India are mopping up raw materials and food products so that growers can't grow enough. This in turn has led speculators to bid up the price of raw materials, including food. So the reason why we are paying more for wheat, or corn or rice, for example, are due to speculative activity. Of course, the other reason cited is that more crops are being grown not for eating but to produce biofuels because fossil fuels have become so much more expensive. I am not sure that environmental concerns are significant considerations in the production of biofuels, though it has garnered a higher awareness globally.

Whatever the case or reason may be for the inflation in price of raw materials and food, if we had been prudent in our spending, saving for that rainy day (and this is a figurative rainy day), then we shouldn't be in too much of a fix. In such times, we shouldn't be too choosy about the rice that we eat, whether it is too sticky or not. Its rice, for heaven's sake. It isn't poison. Surely, if we want to be choosey, we cannot but complain. Well, tell that to the God of Crops. But actually, we don't have to look to the Gods. If the current inflation is due to speculative activity, then prices will fall eventually. Some experts predict that these stratospheric prices will collapse within one year as it is foolish to bid up the prices of food (on the commodities market) and hold it there for the long term.

It is the poorer amongst us who will feel the pinch more, but I fail to see how Fairprice's setting up of a proposed rock-bottom-priced discount supermarket would help. I thought Fairprice was set up for the poor among us anyway? You mean Fairprice has gone up-market already, so much so that the very people for which it was set up cannot afford its prices anymore? If this is the case, then we should re-look Fairprice and not go off to set up a LowPrice store. Everybody likes low prices (except those who have more selective taste-buds). If LowPrice were set up, how would it ensure that only the most needy - its target customers - can buy from it? There really is no way, short of getting people to be checked either through their latest payslip or latest income tax assessment or bank account - all of which are not fool-proof anyway. At the end of the day, LowPrice would probably cannibalise Fairprice's market, leading to shortages in LowPrice and forcing it either to raise prices, increase supplies at the expense of Fairprice, or close down. So I don't see why anyone should waste time bothering to study the viability of setting up a lower-priced retail outlet. This simple thought experiment should already suffice. The idea is dead before arrival. Instead, Fairprice should ask itself why its prices are not low enough for the poorer amongst us, if it is serious about the poor and affordability. Or has it lost its way with the segmenting of its market upwards with Fairprice Finest, Fairprice Xtra and (earlier) Liberty Market?

Image source: Author: Iván Melenchón Serrano

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