Soaring cost of food high on the agenda in Dubai

A steep rise in food prices and concerns over food security are high on the agenda for the thousands of food and beverage industry companies gathering in Dubai for the Gulfood conference, which starts today.

The soaring cost of key commodities, such as wheat and sugar, is cutting into the profits of food producers, forcing some to raise their prices.

Meanwhile, oil prices have been propelled by regional unrest to a 30-month high. These increasing costs are key concerns for retailers and consumers, particularly in the UAE, which imports as much as 85 per cent of its food.

John Sfakianakis, the chief economist at Banque Saudi Fransi, said regional governments could offset these effects in the medium term, such as by increasing food reserves, but there was little that could be done to avoid price rises.

"If oil prices go up and are sustained at a high level, it will have a feed-in effect on the rest of the commodities and the economy as a whole … You can take measures to alleviate some of the pain, but a lot of the pain will have to be converted to prices and end-users eventually," he said.

Food prices last month were the highest in at least 20 years, according to the UN Food and Agriculture Organisation (FAO). The FAO food price index, which incorporates average prices of meat, dairy products, cereals, cooking oil, fats and sugar, reached 231 points last month, higher than the peaks of 2008 and the highest since the organisation started tracking prices in 1990.

Wheat futures for next month on the Chicago Board of Trade reached US$776.50 per bushel on Friday, up 34 per cent from the same period a year before. Sugar futures for next month hit 31.52 cents per pound on Friday, up 59 per cent year on year.

Oil prices have also risen on the back of regional unrest in Libya, which has disrupted the North African country's crude oil output. Brent crude futures for April delivery reached $112.14 per barrel on Friday, the highest in more than two years. On Friday, the US Federal Reserve vice chairwoman Janet Yellen and the European Central Bank vice president Vitor Costancio said their organisations would take action if higher oil prices were passed through to other costs, Bloomberg News reported.

The commodity price rally has already prompted some retailers and food producers to pass down these to consumers. Coca-Cola and Pepsi raised the prices of their products in the UAE by as much as 50 per cent last year, from Dh1 to Dh1.50 for a standard can.

Rami Benjamin, the business development manager for Masafi, which produces bottled water, juice and snack foods, said it planned to talk with its partners during Gulfood about strategies to cope with higher commodity costs.

"Everything is having a price increase," he said. "We are trying as much as we can to absorb this, but definitely there are limits to this. It's an opportunity when we can meet up with our suppliers, with our partners in different parts of the world. We'll discuss the whole thing, and we'll try to compromise."

More than 3,800 exhibitors are expected at the Dubai World Trade Centre today, 1,400 more than the last year, organisers said. A temporary wing covering more than 4,450 square metres was built to accommodate the extra participants, said Mark Napier, the director of exhibitions and events for the Dubai World Trade Centre.

aligaya@thenational.ae