10 Things about efforts to rein in food prices
The government is taking a holistic approach to combat high food inflation, looking at issues in production, logistics, supply and retail.
1 Does the Central Bank discuss food price inflation?
The Central Bank’s general approach is not to discuss food prices every month when it releases inflation figures. The Central Bank needs to accept the fact that the price of food is an end result and should look into the reasons leading to it. The food committee, which was formed for this very reason, offers an important opportunity to do this.
2 Which areas are being analyzed to solve the issue?
Central Bank Governor Murat Cetinkaya said that there must be a holistic approach to food and agriculture. To do that, there need to be substantial studies into production, logistics, supply and retail. These studies need to be coordinated since all these areas interact with one another.
3 What’s planned for the production side?
There are roughly 25 ongoing studies into food production, production planning and incentives, starting with the sustainability of critical products. Work is in progress to prevent sudden fluctuations and withdrawals from production and to make costs as reasonable and supportive of production as possible. Easy access to funds is very important, and areas such as licensed warehousing might benefit from funding to improve efficiency.
4 Where do manufacturing associations stand on price-cutting policies?
Organizing under an umbrella is important in reducing production costs, as well as for planning and sustainability. Unions and manufacturing organizations are also good for improving funding conditions, and the Agriculture Ministry is already working on that. A critical issue while studying agriculture and food is data infrastructure. After the farmer decides to produce a particular crop, a monitoring system could offer an early indication of demand, helping him to determine the amount to produce and mitigate supply-and-demand fluctuations, which is a problem for farmers.
5 What are the logistics targets?
After harvesting, crops are cleaned, classified and packaged. Packaging therefore has a direct impact on the amount of waste, making it an essential issue to investigate. Another key element is freight con- ditions of produce. The cold chain - the temperature-controlled food supply chain - is a hot topic, and the Customs Ministry has conducted several studies looking into it. Product standardization and market-supply logistics are critical. Produce should be transported in such a way as to minimize waste and maximize durability and shelf life before it reaches consumers. All improvements in those areas will have a significant impact on prices.
6 Which models are considered on the supply side?
There are some studies into how to optimize the supply chain in terms of prices, transportation and access as well. The most critical link in the chain are producers. There is an emphasis on gathering producers into organizations to shorten the chain in order to improve market access and increase the amount of produce consumers receive.
7 Is the emphasis on protecting consimers or producers?
The government is aiming for a balanced model that can protect both producers and consumers. The Ministry of Customs and Trade are working on improving wholesale food markets, which should help to reduce the size of the unrecorded economy. However, the most critical issue is again data infrastructure, particularly for monitoring the supply chain. The moment a crop leaves the farm, we need to know which phases it goes through in the supply chain, how it will be priced and in what volume it reaches the consumers on the retail end.
8 What will be done on the retail side to reduce prices?
The retail sector will be closely monitored too. The government is currently promoting the importance of contractual agriculture practices, which is expected to move into a pilot phase where big retailers make contracts with producer organizitaions. Because predictability is important for retailers. That’s why the supply chain should deliver goods to customers in the desired packaging, under the desired conditions and with the desired quality and standards. In this sense, the retail side and the supply chain are nested.
9 How will pricing be monitored?
Another prominent issue is the retail-pricing mechanism. With effective data infrastructure in place, prices can be monitored to determine how they take shape, where the big differences are region by region, sudden fluctuations and the standardization of products. A mechanism is being developed to answer such questions.
10 When will these studies show results?
The Central Bank looks at the reasons behind increasing food prices while trying to minimize the effect on inflation. It does not do that by focusing on a single point but by pursuing a broad approach where all links in the chain – production, logistics, supply and retail – are considered. This approach will definitely have an impact on the agriculture and food sectors in the medium term, if not in the near term.