(DENNIS B MALLARI)
The price rise is set to hit consumers hard, with a high possibility of inflation levels rising to 12 per cent and hindering the government’s ability to slow down the trend. “There is a growing shortage of various necessary food supplies and the trend is not likely to slow down soon,” said Jannie Holtzhausen, Chief Executive of leading supermarket chain Spinneys.
The increase is largely attributed to the demand for foodstuff used for the production of bio-fuels, and from emerging economies.
Poor harvests, low stockpiles of food and imported inflation are also thought to be pushing food prices high.
Global food benchmark prices for cereals will reach much higher levels this week. Prices of wheat, rice, soya bean and corn will increase across the world.
With about 80 per cent of its foodstuffs imported from the US, Europe and Asia, the UAE started feeling the pinch of global food price increases in the second half of this year.
Internal factors such as rising domestic and commercial rent and inflationary pressures against the background of weakening dollar are already taking a toll on residents and the economy. “With many families in the UAE depending on salaries, high inflation will affect the purchasing power of the residents. The growing population in the UAE is further straining supply levels,” said Ahmed Mohammed Al Midfa, Chairman of Sharjah Chamber of Commerce and Industry.
Al Midfa said the inflation in the UAE is likely to reach 12 per cent next year, from the current 10 per cent as the prices of food items continue to soar.
He pointed to the growing shortage of rice and other cereals in the UAE, which might continue to push prices further.
Al Midfa said the UAE Government is trying to open doors for more importers to source foodstuff from new markets in order to cope with the shortage.
According to international analysts, while food prices have increased at their fastest pace this year, the full effect of these increases will be felt only next year.
The US Department of Agriculture has predicted that global corn stocks will dwindle to a 33-year low of 7.5 weeks of consumption, while global wheat stocks will plunge to their lowest level in at least 47 years at 9.3 weeks.
Bijoy Pulicken, marketing manager at Abu Dhabi Co-operative Society (ADCS), said next year is likely to witness a huge number of suppliers breaking their contractual agreements before they end. “There is a high possibility that suppliers will come up with fresh pricing terms for every new contract, but there is also a likelihood of some of them seeking to end a contract prematurely as price increases continue unabated,” he said.
Countries such as Pakistan and India that contribute a huge chunk of the UAE’s food imports are not pegged to the weakening greenback and are putting additional pressure on import bills, said Pulicken.
“It is beyond our powers to curtail inflation. Most of it is imported and there is nothing much we can do about it,” he said.
ADCS, the leading retail outlet in the capital, is now trying to project non-branded goods to have some kind of control over prices.
Brace for new price rise wave