The Tribune

• Retail Grocers’ chief: We need World Bank to be wrong

• Cooking oil surges 80%; some food rises are ‘excessive’

• Bahamian distributors must ‘play the hand we’re dealt’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamians were yesterday urged to “hope and pray” that the World Bank’s forecast of high food and energy costs lasting three years does not come true, with cooking oil and other staples increasing by up to 80 percent in recent months.

Philip Beneby, the Retail Grocers Association’s president, told Tribune Business he has never experienced such food price volatility before. He added that it has left Bahamian retailers and wholesalers with little choice but “to play the hand we’re dealt” given that this country’s $1bn annual import bill makes it highly vulnerable to inflationary shocks outside its control.

He spoke as the World Bank, in a grim outlook for Bahamian consumers and others worldwide, predicted that the commodity price shock inflicted by Russia’s invasion of Ukraine will result in expensive food and energy prices lasting for a three-year period until 2024. The Washington D. C. based institution added that this risked returning the world economy to the stagflation era of the 1970s, when inflation combined with low to no growth and high unemployment.

“The World Bank has more information than I have, and it has more information than you have,” Mr Beneby said in response. “That is their prediction. We can only hope that it is not so and try our best to hold prices as much as we can in order for us to stay in business.

“With high prices, that trickles down from the top to the bottom. The only thing I can say is I hope and pray it doesn’t come true. I hope and pray that they’re [the World Bank] wrong. Businesses have been trying to cut back as much as they can and hold the line, but there’s only so much we can do when high prices take place. At the end of the day, we still have to keep our doors open. It’s not easy. You have to juggle, keep your head above water and stay in business.”

Bahamian companies can only absorb increased input costs to a point before it erodes their margins to the point where they become unprofitable, thus leaving them with no choice but to pass at least a portion of these hikes on to consumers. As a country that imports around 90 percent of what it consumes, The Bahamas is especially exposed to soaring external inflation sparked by COVID-19 and subsequent supply chain disruption.

These effects have now been worsened by the Ukraine conflict, which has sparked further spikes on global oil prices. The resultant increase in gasoline (transportation) and energy costs has been felt by all Bahamians via across-the-board price rises for multiple products, resulting in what some commentators have described as a cost of living “crisis” that has left no country unscathed.

Mr Beneby said food retailers and wholesalers, together with the wider private sector, faced significant fixed costs and overheads, particularly labour and electricity, together with multiple government taxes and fees such as Business Licences, real property taxes and National Insurance Board (NIB) contributions. Unfriendly, archaic bureaucratic restrictions such as price control further exacerbated these woes.

“All of that we have to contend with,” he added. “Some of the price increases on food items have been minimal, and then there are some that have been excessive. I was just about to mention cooking oil; that’s been one of the items that has really increased. Cooking oil has increased by as much as 75-80 percent in some cases, maybe even more. There have been a lot of disposable items, food trays, where the increases have been exorbitant.

“There ain’t much we can do if truth be told. There’s nothing much we can do when we are hit with the increases. You have to work with what is handed to you.” Some retailers, such as Super Value, have built up inventories and sought to exploit buying power and sourcing from new suppliers at competitive rates to hold prices down.

However, Mr Beneby said carrying costs associated with maintaining high inventory levels added another cost for retailers and wholesalers. “There are some items that you may stock up on if they’re not readily available and there are some items that the wholesalers tend to run out of rather quickly, rice and other stuff,” he added.

Asked whether he had encountered such price turbulence before, Mr Beneby told Tribune Business: “I don’t think there’s any other time I can recall that we have seen this type of increases in food prices. The prices are just... there’s nothing you can do about it. What can we do? That’s the way of the world today. You just have to play the hand you’re dealt, and play it the best you can.

“We are all concerned for the consumer. The consumer has a lot to deal with; increasing food prices, increasing gas prices, increases almost everywhere you can go. They only thing they can do is buy what they need, and what they don’t need... What you can do without, save those couple of dollars for where they will be needed. See what can be afforded and where you can get savings.”

The World Bank’s prediction follows swiftly behind the International Monetary Fund’s (IMF) projected 7.3 percent inflation rate for The Bahamas in 2022, which represents the highest sustained increase in prices experienced in this nation since the 1990s - some 30 years ago. Inflation is then forecast to moderate to 4.5 percent in 2023, then returning to a more normal 2.4 percent come 2027.

Yet the World Bank, which is often viewed as the IMF’s ‘twin’ or counterpart, predicted that Bahamians and all nationalities will have to cope with an elevated cost of living for several more years. Indicating that the pressures will not ease overnight, it said that in the two years since the COVID-19 pandemic the world has seen the biggest increase in energy prices since the 1973 oil crisis and the greatest jump in food and fertiliser prices since 2008.

Food and energy costs are predicted to remain above their five-year average through 2024, with oil prices set to average $100 per barrel for 2022 and decline only slightly to $92 in 2023. The former price represents a year-over-year increase of 40 percent. As for food, the World Bank expects wheat prices to soar by 40 percent this year as the war hits both Russia and Ukraine, which are major producers and exporters.

Wheat is typically milled into flour, which is then used to make a wide range of products including bread, cereals, crumpets, muffins, noodles, pasta, biscuits, cakes, pastries, cereal bars, sweet and savoury snack foods, crackers, crisp-breads, sauces and confectionery items. Thus any wheat/flour supply shortages and price increases will raise the cost of these items.

Russia is the world’s third-largest wheat producer and Ukraine is the ninth largest, based on 2017 data. Between the two, they produced 112.1m tonnes of wheat that year, but a combination of fighting, sanctions and the substantial damage inflicted on Ukraine’s infrastructure could disrupt or prevent such supply for some time to come.

Russia and Ukraine together are responsible for almost one-seventh of the world’s wheat supply, based on that 2017 data, but recent estimates have pegged their contribution as high as 25 percent. As a vital commodity and food staple, wheat prices as measured by the Chicago Board of Trade jumped 5.43 percent on February 24, the day Russia invaded.