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Raw materials lead to price increase

Elenoa Baselala
Monday, August 15, 2011

APART from the 2.5 per cent increase in VAT, other factors like low sugar production and high dependence on imported raw materials for milk and butter production have led to price increases.

Fiji Dairy Limited now imports about 90 per cent of its raw materials for butter and milk production. So we are paying more for our food imports.

Further, the increase in electricity tariffs in November 2010 and April 2011 meant that traders have passed down the increased cost to consumers.

Price decrease can be attributed to price control measures on most products.

The Consumer Council has long been an advocate for price control on essential food items and the new price control regime has had its positive effects on consumers. Otherwise, traders would be free to increase prices at will.

The hike in food prices reflects the global trend as world food prices have been volatile in the past 10 years.

UNs Food and Agriculture Organisation's (FAO) Food Outlook report for May 2011 indicates a 37 percent increase in average food prices since the May 2010 report.

FAO predicts world food prices to remain high and volatile for the remainder of 2011.

The Reserve Bank of Fiji (RBF) has put inflation at 10.3% for June up from 8.8% in May. The food price increases as shown by the Council's price surveys and the increase in price for regulated items reflects the inflation level announced by RBF.

Furthermore, the RBF's first quarter review (March 2011) noted that apart from the increase in FEA tariff rates, "further pressures on prices are expected to stem from the current escalation in oil and food prices." The RBF noted that in 2011, "soaring global oil and other commodity prices" were expected to "dominate domestic inflationary outcomes". Thus the prices of basic food items are more likely influenced by the increase in world oil and commodity prices.

Consumers International is equally concerned with food price increases globally and is advising consumer organizations to work on this issue to understand the causes of the price increases and possible mitigative measures to ease pressure on consumers.

Food price increase is an issue of great concern to the Council because it knows that consumers are feeling the pinch when it comes to their weekly grocery shopping. The cost of living is rising and food prices are one of the major concerns to Fiji consumers, second only to energy price.

The Council is urging consumers to be mindful of the increases and therefore be serious on very prudent management of their budgets and the way they spend their income. Because of high dependence on imports, prices of food items are not immune from price increases in the source countries. While price hikes are a fact of life, the Council is mindful that some unscrupulous retailers continue to engage in unfair trade practices.

The Council is also urging traders to ensure those special offers are genuine and not to exploit consumers. However, when we compare price change for past one year (ie July 2010 to July 2011), it is noted that price of 6 food items ie Rewa Life, Rewa Powdered milk, dhal, onion, salt, tea leaves decreased whereas for other 14 items, the price went up. These are flour, sharp, butter, red cow powdered milk, rice, soya bean oil, sugar, tuna, eggs, potatoes, corned beef, corned mutton, and canned fish.

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