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Food prices rise in January on price discount reversal—Reports

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By Nkiruka Nnorom

WORLD food prices recorded an increase last month compared to the previous month in December, 2018, reports by United Nation’s food agency, Food and Agriculture Organization, FAO, and a Securities and Exchange Commission, SEC, registered investment banking firm, Arm Securities, have shown.

On the domestic front, the Arm Securities’ retail price tracker – Pentad Urban Retail Price (PURP) index, showed that there was a modest pace of price increase of 0.42 percent month-on-month (MoM) to 111.3 points in January against 0.45 percent MoM in December. Price pressure remained more evident in the commodities and consumer basket.

On the international front, FAO stated that the increase in food prices during the month was buoyed by a rebound in dairy prices and stronger showings for vegetable oils and sugar.

In the report, titled, “Prices Take an Inch Back – Pentad Urban Retail Price Tracker”, Arm Securities noted that price pressure was more evident in the commodities and consumer basket, with the increase in the latter driven largely by reversal of price discounts following weeks of discount sales.

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“On other fronts, prices were lower across the brewery and oil & gas sectors.

Brewery basket

In the consumer basket, average prices increased by 2.2 percent MoM largely due to reversal of price discounts following weeks of discount sales.

Elsewhere, we noted increases in price of Close Up (+8.1%) and Dangote Pasta (+4.6%) which was not linked to any reversal of price discounts. Current price of Close Up now match the price of its closest competitor, Oral B.

On the other hand, the increase in price of Dangote pasta now places it at a premium to Honeywell and Golden penny pasta.

“Prices in the brewery basket moderated slightly by 0.10 percent MoM as competition remained stiff in the sector. Price moderation was more evident in Goldberg (-1.2% MoM) and Satzenbrau (-0.6% MoM).

Average price in the commodities basket remained elevated over January with prices rising by 0.57 percent MoM. Importantly, palm oil prices extended its rally into the month following festive period induced price hike.

“Nonetheless, prices are almost 10 percent lower compared to same period in the prior year. In a different trend, average price of rice moderated over January. Despite incessant floods, bumpy harvest continued to support crop production and supply during the period,” the firm said in the report.

The report further noted that prices in the oil & gas sector moderated over January with average prices down by 0.78 percent MoM largely on the back of lower cooking gas price (-2.3% MoM), adding that the rise was largely due to increased domestic and foreign supply.

Prices in the cement sector, according to the report, increased by 1.0 percent MoM following a decline in the previous month and increased demand for cements by consumers.

Rebound in dairy price propelled food prices – FAO

FAO’s food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 164.8 points last month, against 161.8, in December.

Nonetheless, FAO explained that despite the rise, the index was still 2.2 percent below its January 2018 level.

The FAO dairy price index jumped 7.2 percent from December’s value, ending seven months of declines. FAO said limited export supplies from Europe, caused by strong internal demand, was the main driving force behind the increase.

FAO’s vegetable oil price index rose 4.3 percent from the previous month, while its sugar index rose 1.3 percent and its cereal index made marginal gains on December. The meat price index was largely unchanged.

FAO lifted its latest world cereal production forecast for 2018 to 2.611 billion tonnes, slightly higher than the December reading, reflecting upward revisions for maize, wheat and rice.

“Much of the projected growth is associated with expected increases in Europe, where beneficial weather has so far shored up yield prospects while also sowings are forecast to expand, largely driven by attractive prices,” FAO said.

Despite the rise in the latest projections, global cereal production is still expected to remain 1.8 percent below the record high of 2017.

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