Food prices likely to continue to soar

 by Marlon Madden

One of the Caribbean’s largest conglomerates is warning of significant increases in food costs in coming weeks, as importers are slapped with massive increases in freight costs out of China.

Don Wehby, Group Chief Executive Officer of GraceKennedy Ltd., warned that higher food prices were inevitable, and he called on regional policymakers to focus more on providing critical support to local producers in an effort to perk up the Caribbean’s food sustainability efforts.

He was speaking during a recent session of the Caribbean Development Bank (CDB) 51st annual meeting of the Board of Governors. The theme for the June 15 to July 1 seminar is Innovation, Transformation and Sustainable Development.

“The whole issue of food sustainability for the region was highlighted significantly in terms of the COVID-19 crisis, and we need to unite as a Caribbean region to ensure that we invest in agriculture, agro-processing and manufacturing, and that will make us self reliant on the region as one in terms of food,” said Wehby.

The Jamaica-based businessman said he was informed last week by his team that the freight rate out of China had been increased from a pre-COVID-19 rate of US$2,500 per 20ft container to US$15,000 per 20 ft container as at June 17.

This represents a whopping 500 per cent increase in the cost to ship items to Kingston from Shanghai.

The increase is similar for other destinations, affecting the cost of food, furniture, car parts, and toys, among other commodities.

“What we are talking about is a significant increase in food inflation. Every main supplier that GraceKennedy has – and we are a world company with businesses in Canada, US and the UK – we have been seeing significant increases in basic food prices.

Obviously, we are going to try and manage that well, but some amount of that must be passed on to the consumers,” Wehby warned.

“I asked my purchaser how long they think this kind of freight rates will last, and to my surprise he actually said August 20, 2022. So we are going to have some headwinds as a region,” he added.

It is against this backdrop that Wehby issued a call to regional governments to support farmers “by providing them with low-cost financing. We need to try and create a system of crop insurance, which is going to be very important”.

Pointing to the GraceKennedy model, he said he believes large manufacturers and distributors should guarantee the purchasing of produce from the “small farmers” and supply them with financing and raw materials.

“Also as a policy, we need to strengthen the tourism linkages . . . when that industry is up we need to ensure that the local producers in the region provide these hotels with their goods and services.

That can have a significant impact on the GDP growth in any country, from farming right through to the craft makers,” he said.

He added it will also be critical that governments in the region “roll in the red tape and roll out the red carpet for investors and entrepreneurs”, adding that it was also an opportune time for the speeding up of digitalisation across the public and private sectors.

Pointing out that the skill sets for some areas were non-existent in the region, he said his company has already reached out to the University of the West Indies to provide such training.

In addition to being the largest remittance company in the Caribbean, GraceKennedy, a pan-Caribbean conglomerate, is involved in banking and investment, distribution, retail, insurance and manufacturing.

Wehby also recommended that coming out of the COVID-19 pandemic, the region should promote greater public/private sector partnerships, adding that there were some sustainable growth needs that governments were simply unable to fulfill on their own.

He also wants greater efforts to be made to attract more people from around the world to live and work n the region.

The businessman also reiterated his call for a “proper” capital market in the region.

“I have been saying it for 15 years or more, that we need one stock exchange for the region.

“We have been relatively insular in doing that . . . I believe that capital in the Caribbean should reside in one exchange, whether it is US dollars or some other currency. That can be a game changer going forward, where we can allocate properly, capital where we can get the best return,” said Wehby.

Addressing Barbados on the weekend, Prime Minister Mia Mottley indicated that her administration had not ruled out the possibility of putting price restrictions in place for some items, as she acknowledged that price increases were inevitable.

In fact, Mottley said with the knowledge that global commodity prices have been increasing over the past year, she said she has already reached out to the private sector through the social partnership, for them to keep their margins low “until we are able to get back on our feet”. “We have not ruled out price controls,” said Mottley.

She said Government will also be putting a cap on the amount of Value Added Tax (VAT) it will collect in coming months from the fuel tax, such that if oil prices continue to rise, the cost to consumers will be restricted at a certain amount.

“We have started to discuss it with the Ministry of Finance officials,” she said.

marlonmadden@barbadostoday.bb