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.

Dünya Executive - - PROBE - by Ali Ekber Yildirim

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.

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