Crude oil prices have broken the US$100-mark, and there are fears that if the forecast of US$150 a barrel this September proves to be true, skyrocketing prices could have a domino effect on other consumer prices.
Alberto Young, general manager of Grace Kennedy Belize Limited, a subsidiary of Grace Kennedy in Jamaica, told Amandala Wednesday that it is important for consumers to understand what is happening on the economic scene.
Young said consumers will see some price increases, and that, he said, will be compounded by the fact that businesses will have to recover costs in 2011.
“Consumers need to be aware of the impact of the global environment and supply on what their daily basket of products looks like, and I think it is necessary so people can understand when they see something go up, why it goes up,” Young said.
He told us that, “There are already price increases on some basic items: shortening, wheat and milk.”
He also forecasts that if current trends hold, there is likely to be an increase in the price of bread and other basic food items.
A representative of Belize Mills Limited, which imports wheat into Belize, confirmed to our newspaper that worldwide, wheat prices have been increasing substantially. However, since they bought stocks last year, the shipment of wheat being unloaded today does not reflect the price hikes. The representative said they cannot say that the next wheat consignment won’t be more expensive.
Young noted that whereas the price of wheat has gone up about 60% since last September, milk prices have increased at least 20% over the past three months. “The projection is that it will continue to increase, though maybe not at the same rate,” he said.
He added that the price of shortening has risen at least 15% over the past month and that, too, is projected to continue increasing.
Grace Kennedy Belize, which carries 400 SKU’s or “supply keeping units” of products, made nearly $20 million in sales last year, but recorded a loss on its books, said Young, noting that they had to also send home some employees and paid only a 2% salary adjustment to workers. He said that the company held down prices despite the increase in the price of imported goods.
“We tried to hold on and absorb as much cost as we could,” he said. “However, you cannot continue doing that when the costs keep accumulating. That is the trend we are seeing from last year. Most businesses try to cope by not increasing prices.”
Young, who is also the vice president of commerce for the Belize Chamber of Commerce and Industry, said, “Most businesses are coming out a very bad 2010, with the recession and all the other factors that have impacted businesses negatively. Businesses are now trying to recover.”
That recovery, said Young, will likely be stunted by rising prices in some key commodities: wheat, sugar, corn, milk and shortening.
High oil prices are sending up production costs, he noted.
“We are already at a hundred dollars. We all know what happened the last time that occurred. Look at the fuel prices at the gas pump. It is now over $10. And diesel is very close to the 10-dollar mark. And that impacts a lot of other things – transportation and distribution,” said Young.
Oil price hikes, he noted, also impact freight as well as the cost of packaging materials.
“That puts pressure on the cost of supplying food to our country, which has already impacted [other goods]; for example, the price of wheat has gone up, and beyond oil the other things that impact prices are scarcity and demand,” Young added.
He said, “We all have to work together to ensure our economy continues to grow, and there is an opportunity to create more employment.”
When the economy isn’t going well, he said, “...everybody suffers, because there is no spending power.”
He said that people are very cautious in borrowing and spending, but, he added, “there has to be spending, there has to be trade – healthy trade. That’s also something to watch.” AMANDALA