Govt breaks up exploitative prices


There’s a recurring phenomenon each year when the Ramadhan fasting month comes around: staple food prices pick up.

As people are familiar with the situation, they seem to take it for granted, assuming that a peak in demand will naturally increase prices.

However, this seemingly “general truth” does not apply to Trade Minister Enggartiasto Lukita, who believes the pattern is neither correct nor normal and speculators play a big role in pushing up prices.

Determined to change this, in early April the minister called on big producers and distributors of staple foods such as sugar, cooking oil and meat, to set reasonable price level for themselves as well as their consumers.

“I locked them in the auditorium [of the Trade Ministry] for three days and nights. We did this until we agreed on the set prices,” Enggartiasto recently told reporters.

Since then, the price of sugar and cooking oil has settled at Rp 12,500 (94 US cents) per kilogram and Rp 11,000 per kg, respectively, while frozen beef and Indian buffalo are sold for up to Rp 85,000 per kg and Rp 80,000 per kg, respectively.

The mutually agreed to price ceilings came into effect on April 10.

The move is designed to anticipate the fasting month in late May and the Idul Fitri festivities in late June as people in Indonesia, the world’s most populous Muslimmajority country, eat much more than usual to break their fast or cook special dishes during family gatherings.

The Trade Ministry has also joined forces with a food stability task force set up by the National Police along with related stakeholders, including the Agriculture Ministry, the Business Competition Supervisory Commission (KPPU) and state-owned logistics firm Bulog, to closely monitor food prices and avert food hoarding practices nationwide.

The effort seems to be generating the desired goal. At the beginning of Ramadhan, prices of staple foods climbed modestly, reversing trends seen in previous years.

Data from shows that on Friday, the price of bulk cooking oil rose by only 2.5 percent to Rp 12,300 per kilogram, while the price of fresh meat was up 2.86 percent to Rp 32,350 per kg and the price of eggs was up by 4.23 percent to Rp 22,200 per kg. Garlic prices, meanwhile, slipped by 0.86 percent to Rp 51,600 per kg.

The price of frozen beef, for example, is now lower than last year when the price rose beyond Rp 120,000 per kg.

Up to Wednesday, Bulog claimed it had secured 33,000 tons of buffalo meat and 360,000 tons of sugar to distribute across the country.

Enggartiasto admitted that the still high price of garlic remained a concern and that this had been addressed through recent imports.

“I don’t say that relatively stable prices means that we’re 100 percent successful, but at least we’re seeing low inflation,” he said Wednesday.

Alleged hoarding practices by importers are said to be a cause of persistent high prices. The police are investigating these alleged practices in Jakarta, Medan and Surabaya.

In a separate development, the Central Statistics Agency (BPS) reported on Friday that monthly inflation stood at 0.39 percent month-on-month (mom), bringing the annual inflation rate to 4.33 percent year-on-year (yoy).

The inflation was primarily triggered by hikes in the prices of food commodities such as garlic, chicken eggs, chicken meat, rice and beef alongside other costs such as electricity, fuel, airline fares and cigarettes.

Coordinating Economic Minister Darmin Nasution acknowledged that May’s inflation was quite high and attributed this situation to volatile food components. He added that the government had found irregularities in the distribution of some food commodities, including garlic, with importers contributing to market distortions.

“Let the trade minister deal with them,” he said Friday.

Despite May’s inflation, Darmin said this year’s maximum inflation target, set at 5 percent, was still achievable by the end of 2017.

Bank Central Asia’s (BCA) chief economist David Sumual said imports of food commodities could help maintain a good supply and tame prices in the short- and medium term. However, in the long term, improved production will be the ultimate solution, he said.

“We should improve longterm food productivity because in terms of quantity, our domestic production of commodities such as garlic, is still low,” David said.

Sugar might not taste so sweet this monsoon. Time to sell?


A poor monsoon in 2016 helped propel the market higher as sugar prices received the next booster dose. From a low of Rs 2,165 per 100 kg in July 2015 sugar prices crossed the Rs 4,000 mark by February 2017. Will this rally continue?

Sugar stocks have been trending upward since the second half of 2015 when the first indication of a crop failure was visible. A poor monsoon in 2016 helped propel the market higher as sugar prices received the next booster dose. From a low of Rs 2,165 per 100 kg in July 2015 sugar prices crossed the Rs 4,000 mark by February 2017.

Sugar producers participated in the rally giving multi-bagger returns during this period. Stocks like Dwarikesh Sugar shot up from a low of Rs 23 in August 2015 to a high of Rs 504.90 recently — an appreciation of 22 times.

The key question is whether the party is likely to continue in future or is it over?

A simple answer is a lot depends on monsoon. Sugar as an agriculture crop is a water guzzler. It has unarguably the most sensitivity to monsoon.

Initial estimates suggest that we are headed for a normal monsoon. US Department of Agriculture (USDA) has predicted that India’s sugar production in FY17-18 would touch 25.8 million tonnes, a jump of 18 percent over last year. Indian agriculture bodies are expecting the number to be around the 25 million mark. In both the cases sugar supply is likely to exceed sugar demand of 24 million tonnes.

Sugarcane acerage in the current year has already touched 46.5 lakh hectares as of last week vs 43.9 lakh hectare last year.

Higher acerage is also on account of government introducing an 11 percent increase in Fair and Remunerative Price (FRP) for the upcoming season. This was necessitated by the government as sugar output had dropped to a seven-year low of 20.3 million tonnes in FY16-17. The problem with these government incentives is that they are hard to remove. FRP has been increased from Rs 130 per quintal in FY09-10 to Rs 255 presently. Irrespective of the monsoon FRP remains at elevated levels.

Unlike fertiliser and subsidised petroleum products, sugar industry bears the high input costs. They are unable to pass on these costs and have to absorb them or take a hit on their profitability.

Thus, if 2017-18 happens to be a good year for sugarcane crop, the industry will have to absorb the cost at a time when the price of sugar would be down. A double-whammy for the industry.

Sugar industry posted profits for the first time in seven years as sugar prices rose. But despite higher profits, the industry has not paid back the farmers, in the main sugarcane growing states of Uttar Pradesh and Maharashtra. Any drop in sugar prices is likely to result in the problem aggravating further.

To make matter worse global sugar production is also likely to be a bumper one. USDA has forecasted that world sugar production would rise to 180 million tonnes on higher account from Brazil, India, China, European Union and Thailand.

For the first time in three years world sugar inventory is likely to increase as demand is also likely to come down marginally to 171.6 million tonnes, a drop of 0.3 million tonnes. Many countries in the developed world have imposed a ‘sweet tax’ to check rising cases of obesity. Also, companies in China are increasingly using cane syrup in the final product as compared to sugar.

Headwinds are clearly visible for the sugar sector and if monsoon is normal this year, there is little reason to hold on to sugar stocks.

Council Hopeful National Budget Will Further Promote Interests of Consumers

by jet newspaper

With the 2017-2018 National Budget announcement date nearing, the Council is hoping that the government will again consider the concerns of Fijian consumers in its budget priorities.

We have seen from the past budget announcement that the Government always delivered a balanced budget where consumer needs were considered among st other priorities.

We hope this year’s budget announcement will once again focus on high cost of living to bring relief to the consumers.

more here –…

Sugar prices drive inflation to 7.2%


According to data from the Uganda Bureau of Statistics (UBOS), the Consumer Price Index (CPI) has risen by 0.4 percentage points to 7.2% in May from 6.8% that was recorded in April 2017.

The report further indicates that this is so far the highest the CPI rise since the beginning of 2017. CPI is the official measure of price movements in a basket of goods and services over a given period of time.

Addressing journalists at UBOS offices in Kampala today, Dr. Chris Mukiza, UBOS director of macroeconomic statistics attributed the inflation drive to the rise of sugar prices which rose from 23.9% in April to 45.7% in May 2017.

“The scarcity of sugar has highly contributed to driving up inflation. There is high demand for sugar but less supply on the market,” Mukiza said.

The price of sugar last year stood at 26.7%. Sugar costs between sh5,000 to sh7,000 but mid-2017, the price shot up to sh10,000 from sh2,500 of previous years.

“The prices of sugar are high although it is the main ingredient in in our daily products,” Mukiza said adding that producers were attributing it to the scarcity of sugar cane.

He noted that besides sugar, the prices of food crops such as watermelon, fish and matooke also increased to 23.1% in May from 21.6% recorded in April hence driving up inflation.

The prices of fruits and vegetables also shot up to 37.2% from 35.5% and to 15.5% from 14.0% respectively for the period under review.

In addition core inflation which excludes food, fuel, electricity and metered water which are volatile to price changes, also increased to 5.1% in May from 4.9% recorded in April.  

“Core inflation rose due to an increase in prices of other goods such as processed foods, clothing and footwear and services such as hair dressing, education, rent, health, financial and legal services, hotels and restaurants which rose to 5.6% from 5.1% for the period under review,” Mukiza added. 

Bank of Uganda’s (BoU) medium target is to control core inflation at 5%.  Recently, it cut the central bank rate to 11% in April from 11.5% that was recorded in February.

BoU has continuously tightened its central bank rate (CBR) to control growth in private sector credit.

However, annual energy fuel and utilities (EFU) rose 7.0% from 5.3% that was recorded in April. EFU consists of electricity, charcoal, firewood, petrol, diesel, paraffin and cooking gas.

Unmetered water which is sold in jerrycans increased to 9.9% in May from 2.7%

“The issue of firewood and charcoal contributing to the rise of inflation is due to seasonal factors especially during rainy seasons that make transportation very expensive hence leading to an increase in its price,” Mukiza added.

However, month on month, headline inflation rose by 0.6% from 0.4%rise recorded in April 2017.

UBOS principal statistician Vicent Nsubuga said inflation rise means that consumers have to add additional resources or funds which can be got from savings or borrowing; to increase the amount of money spent.

“This is one of the ways through which consumers can be able to get the same amount of items they have been consuming,” Nsubuga said.

He added that two, they (consumers) can forego some of the goods and service they have been consuming to fit into their budget.

“This can affect the quality of life or the basic needs may not fit into your budget resorting to non-nutrient foods within your budget,” Nsubuga added.

Dr. Fred Muhumuza, senior economist and researcher said Uganda is headed for trouble following the inflation rise.

“People think we are just pessimistic, but Uganda’s trend of growth has been down for the last 15 years,” Muhumuza said.

He noted that there is need for massive reforms for the economy to grow since it is a macro economic issue.

Muhumuza added: “The rise of the dollar rate has affected the economy because a lot of money is spent on payment of debts which are in trillions.”

“If we cannot finance 40% of our budget, how can we be able to save our economy?” he asked

He further added that there is need to restructure the economy such as instead of having massive roads construction, it should be reduced to core road construction.