In-depth approach needed to control food prices in Turkey: commodity exchanges union

Published 08 Feb,2021 via Hürriyet Daily News - The Union of Chambers and Commodity Exchanges of Turkey  (TOBB) is set to present a report on ways to curb rising food prices to the authorities, an executive of the union has said.

“We will convey our proposals including an array of measures to the Central Bank and the relevant ministries, and we will continue our efforts to find solutions intensely with new meetings in the upcoming days,” said Özer Matlı, a TOBB executive, following an online Agriculture Council meeting of the union on Feb. 6.

Matlı, who is also the head of the commodity exchange market in the northwestern province of Bursa, said that developing smart agricultural production and increasing efficiency are on top of their proposals.

Widening the scope of the agricultural insurance system and decreasing rates of special consumption taxes on diesel fuel and fertilizers will be among TOBB’s proposals, according to Matlı’s remarks.

He also said that lowering value-added tax rates on food products and providing incentives for electricity used in agricultural production will be in the report.

“Of course, unfair price hikes should be restrained, but without ruling out the main reasons,” said Matlı, referring to stricter price controls imposed at local markets in recent weeks.

Food prices have been on the rise due to pandemic-related disruptions in supply chains, increasing input prices, overstocking, seasonal effects, demand-supply gaps caused by droughts and fluctuations in commodity markets prompted by monetary expansion policies of the central banks, he added.

“What we should do is to prepare a production plan and eventually a long-term agricultural policy to solve the present problems instead of looking for solutions to save the day,” Matlı said.

Global prices rising steadily

Global food prices reached their highest monthly average in January since July 2014 following a steady eight-month rise, the U.N. Food and Agriculture Organization (FAO) said on Feb. 4.

The FAO Food Price Index climbed 4.7 points month on month, averaging 113.3 points in January.

Strong gains in the sugar, cereals and vegetable oils sub-indices drove the increase, while meat and dairy values were also up, though to a lesser extent.

Rising by 8.1 percent from the previous month, the sugar price index surged the most as robust global import demand spurred concerns about declining availabilities.

The FAO Cereal Price Index in January posted a sharp 7.1 percent monthly rise, led by international maize prices.
Last month, the vegetable oil price index went up 5.8 percent to its highest level since May 2012.

In its eighth consecutive monthly rise, the FAO Dairy Price Index climbed to 1.6 percent during this period.

The FAO Meat Price Index marked an increase for a fourth consecutive month, up 1 percent from December 2020 due to brisk global imports of poultry meat.

Central Bank’s analysis

The Turkish Central Bank on Feb. 4 announced its decision to form a division in charge of analyzing developments in the food and agricultural product markets.

This division will “perform an early warning function by carrying out a detailed and timely analysis of data regarding the prices of food and agricultural products that are critical to price stability,” the bank said.

Food prices rose another 2.5 percent last month and more than 18 percent in a year, the Turkish Statistical Institute (TÜİK) revealed on Feb. 3.

Turkish inflation has been stuck in double digits for most of the last three years, well above the medium-term target of 5 percent.

On Jan. 28, the Food and Agricultural Product Markets Monitoring and Evaluation Committee, including finance, agriculture and trade ministers as well as Central Bank governor Naci Ağbal, convened to take measures to stem the rapid rise of food prices.

The new division will also fulfill secretarial duties for the committee, said the Central Bank.

Cumulative exchange rate effects also played a role in soaring food prices, the bank said in an open letter to the cabinet on Feb. 2.

It underlined that the Turkish Lira depreciated by 25 percent against a currency basket last year.

After touching an all-time low of 8.58 against the U.S. dollar on Nov. 6, 2020, the lira has recovered to below 7.06 since then, as the Central Bank lifted its key interest rate to 17 percent and pledges for market-friendly reforms helped attracted nearly $15 billion to the Turkish assets.

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