x Abu Dhabi, UAEFriday 19 January 2018

Ramadan to put pressure on prices

Local retailers in the Middle East say they expect the demand for staple items to spike in the weeks before Ramadan.

Retailers say many prices of staples may rise during Ramadan.
Retailers say many prices of staples may rise during Ramadan.

DUBAI // As concerns over dwindling global food supplies and higher commodity prices continue, local retailers say they expect the demand for several staple items to jump by about two-and-a-half times in the weeks before Ramadan. "In the Middle East, rice consumption goes up because in the month of Ramadan, [people] tend to cook more," said Sunil Bhanji, the general manager in the Middle East for Tilda, a rice supplier. "Purchases start before Ramadan - so somewhere in mid-August this year - and continue through the month of Ramadan."

The UAE imports nearly 85 per cent of its food, including some 750,000 tons of rice annually from countries including India, Pakistan, Thailand, Vietnam and the Philippines. However, recent export bans on certain types of rice from countries such as India, Brazil and Egypt, as well as a temporary ban by Cambodia, have sparked concerns among retailers in the Gulf about potential shortages. "Until now, [Gulf] countries have never looked into having a reserve of rice - except Kuwait and Oman, where the governments used to put in a special effort and a lot of money for stocks," said Mr Bhanji.

Economists have warned that higher prices and demand could often lead to supply shortages, particularly with products where the supply chain is already strained, such as that of rice. Consumers, already concerned over stretched family incomes, generally pay more for food and clothing during the Islamic Holy Month, which this year begins around Sept 1. Last month, the Economy Ministry signed an agreement with many of the country's major supermarkets to reduce the prices of essential food items during Ramadan. Recognising the potential for food shortages, the Government has also urged retailers to start stockpiling basic food items to prevent shortages caused by export bans. Similar measures are being taken in other Gulf countries to ease the burden of inflation and potential shortages.

In Bahrain, where the inflation rate rose from 4.07 to 6.2 per cent in the four months between December last year and April, the government announced that it had set up an import company specifically designed to stockpile staple goods. Also, the government of Saudi Arabia announced in May that it had allocated land specifically for the construction of stockpiling warehouses for foodstuffs. However, stockpiling as a method for easing the burden of increased demand is not seen as a foolproof solution. "[Stockpiling] leads to higher storage costs, food shrinkage, pests eat them, and they get contaminated one way or another," said Andy Barnett, an economist with the American University of Sharjah. "The best thing to do is to sit it out and let the market adjust."

Some local retailers say that despite the imminent boost in demand that comes in the weeks leading up to Ramadan, supermarkets are not yet experiencing any serious shortages. "I cannot always speak globally about the bottom end of the market, where some people of low wages may have to cut back because they can't splash out as much as before," said David Berrick, the retail general manager for Abela Supermarkets in Abu Dhabi. "It is just the nature of Ramadan that people cook more and eat more... and at least this year, I don't see us having any major problems with supplies."