Food costs are tumbling but shoppers still face soaring bills

AS a rout in the price of food commodities from wheat to cooking oil deepens, the cost of products on grocery shelves continues to rise.

Almost a year on from Russia’s invasion of Ukraine, which sent grains and other staples soaring to a record, a United Nations’ index of food-commodity costs fell for a 10th straight month in January.

The longest falling streak in at least 33 years contrasts with the food inflation that’s worsening a cost-of-living crunch for consumers.

Food executives are warning of more price hikes to come, even as commodities like palm oil and dairy decline. Diplomats talk of the worst food crisis since World War II, with parts of Africa on the brink of famine.

This striking dissonance underscores the significant time lag for farmgate prices to feed through to those paid by households. Moreover, food commodities only make up a small proportion of the cost inputs for products such as breakfast cereals.

In the US, the farm level portion of food consumed at home is about quarter of the costs, and only about 5 percent when eating out, according to Joseph Glauber, former chief economist at the United States Department of Agriculture (USDA).

Take bread. The cost of wheat accounts for as much as a 10th of the total cost of a loaf, Glauber said. The rest is driven by transporting the wheat, milling it, making and baking the bread, packaging it and stocking grocery stores, he said.

Higher energy prices are still feeding through to processing costs, workers are demanding higher wages and suppliers are pushing retailers for higher pay.

It’s “the tail-end of the energy price impact that’s still washing through,” Archie Norman, chairman of United Kingdom retailer Marks & Spencer, said in an interview last week. “And secondly, labor costs. We’ve got the minimum wage rising. That has a bearing on almost all growers, producers, manufacturers.”

Inflation has peaked but food prices have not, said Alan Jope, the outgoing boss of Unilever, which makes Hellmann’s mayonnaise and Ben & Jerry’s ice cream. Food giant Nestle SA expects inflation to persist in the first half of the year with some softening after that, according Chief Financial Officer Francois-Xavier Roger.

To be sure, there are signs some prices are easing. In the US, food inflation saw the smallest increase in December in 21 months as prices for bacon, flour and fresh fruit fell. Inflation is starting to moderate, but prices are still rising, according to the boss of Conagra Brands Inc., the maker of Birds Eye frozen food and Slim Jim jerky. “This inflation super cycle has been more significant and more persistent than I think anybody expected at the beginning,” Chief Executive Officer Sean Connolly said in an interview last month.

That moderation won’t console many consumers in low- and middle-income countries, which have been particularly hard-hit by soaring food inflation, the World Bank said earlier this week. A combination of shrinking foreign exchange reserves, weakening local currencies and debt pressures are undermining local economies.

And as for commodity prices themselves, there is still much uncertainty in markets, said Glauber, a research fellow at the International Food Policy Research Institute.

Agri-commodities and fertilizers are still historically expensive, while grain stockpiles remain tight just as extreme weather in places like Argentina and East Africa damages crop prospects, the Washington-based think tank said last week. Also rice, the backbone of global food security, needs to be closely watched.

“There are still risks,” Erin Collier, an economist at the UN’s Food and Agriculture Organization, said in an interview. “Prices have come down but they’re still high and looking firm.” Bloomberg News

Can PHL-US joint patrols scale back China’s moves in Kalayaan, WPS zone?

It will also challenge China’s presence in Scarborough Shoal near Zambales, whose control it wrested from the Philippines in 2012 following a standoff. Beijing has sealed off the shoal from Filipinos who have made it their traditional fishing grounds for centuries.

The agreement on joint maritime patrols was the most important arrangement so far that the country has notched with the US in years, returning US-Philippines defense relations to a significant level.

The joint patrols, seen to counter China’s presence not only in the South China Sea, but more importantly in the KIG and WPS, have been dangled to the Philippines for years by the US, which encouraged a collective patrol, even among Asean claimant states.

The US also pushed for joint maritime patrols with the Philippines, and even the lesser joint maritime exercises in the South China Sea during the term of former President Rodrigo Duterte where China’s activities in the KIG and WPS were at an intense level. The proposals were turned down by the former president.

During the term of the late former President Benigno Aquino III, the government toyed with the idea of forging a Status of Visiting Forces Agreement among Asean states, still to counter China in the South China Sea.

Galvez, viewing the security assurance and even economic benefits of the joint patrols for Filipino fishermen, said it was the mandate of the DND to “secure and defend our sovereignty and sovereign rights such as the freedom of our people to fish in our own waters.”

“We also share the vision of likeminded nations in ensuring freedom of navigation and a peaceful, stable and free

Indo-Pacific,” he said.

“As a member of the international community, we have a responsibility to protect the global commons in order to prevent humanity from constricting itself by ensuring that vital sea lines of communications are kept open,” he added.

Besides joint patrols, the DND said it has agreed to designate four more additional locations for rotating American troops under the Enhanced Defense Cooperation Agreement (EDCA).

The joint maritime patrols will be the first in so many years for the US and the Philippines, as nothing of such activity has ever been conducted from the time of Aquino up to Duterte, as even admitted by a defense official.

The defense official said his only recollection of an activity with the US was that of a passing exercise (PASSEX) in 2014, which is a customary routine ex- continued from a14 ercise given for a passing navy vessel.

The joint US-Philippines patrols were among the key and important recommendations by a US private group, whose members are composed of former government officials, security experts and members of think tanks, to the administration of President Joe Biden as America seeks to revitalize its moribund bilateral relations with the Philippines, which was strained during Duterte’s term.

Another recommendation by the group, the holding of a “2+2” meeting between Washington and Manila, has also been accepted, as DND announced during Austin’s visit.

The only proposal yet to be fully implemented between the two countries is the sharing of information, given the US’ apprehension months ago that information that it will be sharing to Manila may not be handled carefully.