Food for thought
Our agriculture expert looks at why food prices are so persistently high
1 Effects of climate change
The main reason Turkey ascribes to the rising cost of agriculture and food is that production cannot be performed due to higher input prices. Red meat and milk prices are always on the agenda due to problems in animal production. Disasters due to climate change have cropped up more frequently.
2 Change in the countryside
Turkey is experiencing a great change in the countryside. There is a migration not only from the village to the city, but also from the cities to the countryside. This migration is not fueling production but consumption. Due to misguided policies rural people have become consumers. Packaged milk, yogurt and cheese are consumed in villages. Fruits and vegetables are supplied from the market, not from the field.
3 Imports, the sole policy
Turkey has been adopting import policies off and on since the 1980s, to discipline the producer. But in the last 10 years, this policy has peaked. Therefore, except for a few items in which Turkey is a leader like nuts and figs, there is nearly no food product that has not been imported. Instead of reducing production costs and solving problems in the marketing chain, the main policy in agriculture and food to reduce prices has been imports. As imports increase, producers withdraw from production because they cannot compete. Prices rise fueling more imports to lower prices.
4 Input costs in agriculture
The fall in interest or inflation does not reduce food prices because the price of inputs used in agricultural production, and which are largely dependent on foreign markets, are increasing steadily. The price of fertilizer, agricultural pesticide, seed and other inputs increased by 50 to 100 percent since the second half of 2018 due to the increase in foreign exchange.
5 Surprise inspections have increased the price
Recently, onion warehouses were targeted for surprise inspection on President Erdogan’s order because of suspicions of hording to keep up the prices. When the inspections were made, one kilogram of onion was about TRY 5. Scared by the inspections, warehouse owners sent all of their onions into the market. Prices went down by 15-20 kurus. What happened then? Today the price is TRY 6. So the inspections did not lower the price because onions were supposed to be in the warehouse (supply). When the supply decreased, the price increased.
6 Markets not selling pepper and eggplants
Trade Minister Ruhsar Pekcan, who takes every statement by Erdogan as an order, wrote to the 81 provincial governors to increase inspections and other pressures on supermarkets. Supermarket chains are very strong compared to farmers. They immediately reacted and announced that they would not sell highpriced products like pepper and eggplant. What happens when they don’t? Firstly, the producer will not be able to sell the product at hand and the price will drop a little. Then supermarkets will buy from the producer at a lower price. Then those who produce will lose money and stop planting. The crop (supply) will decrease and the price will increase further. Again, the door to imports will be opened.
7 What other methods were tried to lower prices?
To date, many different tools and practices have been tried to reduce food prices, but none have worked. In 2010, the Law of the Wholesale Market was issued so it would lower prices by at least 25 percent. Grocery stores were authorized to buy products directly from the manufacturer. The prices did not fall. Hard to believe but at one time, a policy was devised to lower food prices by preventing exports. The idea behind it was that instead of exporting at low prices, it would be better to sell to our own citizens for cheaper prices.
8 What should be done?
The most important problem is that the products reach the consumer at very high prices due to high input costs, farmers not making enough money and problems in the marketing chain. The problem can be solved by the creation and implementation of a holistic policy that covers all problems like product losses, disasters due to climate change, destruction caused by imports, inadequacy of producer organization, etc.
9 The effect on CPI
The weight of food and non-alcoholic beverages in the total CPI is 23.03. The products in the first five of the food groups and their weight in the total CPI are as follows: 2.1170 percent bread, 1.7882 percent beef, 0.9994 percent lamb meat, 0.8402 percent chicken and 0.8080 percent tomato. The price of tomatoes in for December was TRY 3.97 in the CPI. This month, the price of tomatoes in the market ranges from TRY 6 to TRY 13. Let’s suppose that the average price is TRY 6-7. Even in the current situation, there is an increase of more than 50 percent. According to the weight of the tomato, this 50 percent increase will push the CPI up by 0.40 points.
10 CBRT expects price hike to slow down
In the first inflation report issued by the Central Bank last week, food inflation forecast for this year was 13 percent. Annual inflation in food items as of the end of December is 25.1 percent. In this case, the Central Bank is assuming that food inflation will be reduced by almost half.