El Niño brings concerns on food prices

AFTER a few rainy weeks, the dry spell is here to stay until the first quarter of 2016. Food prices are seen to go up and the country’s inflation goal set between two and four percent might be missed, at least according to HSBC Global Research.

For Efren Carreon, the regional director of National Economic and Development Authority (Neda) 7, while it is highly possible that food prices will go up because of El Niño, this does not necessarily mean that the Philippines is in danger of overshooting its target.

“Food prices can go up, but this will be offset by other products mainly because of the cheap fuel products,” Carreon told Sun.Star Cebu, adding that inflation in Central Visayas remains to be between three and five percent.

According to HSBC, food inflation in the Philippines may start in late 2015. With less rain, agricultural output and yields are expected to decline.

“At particular risk from an inflation perspective are India, Indonesia and the Philippines. However, we note that this is not a positive inflation shock, with rising prices likely to depress demand, especially among consumers,” said Frederic Neumann, HSBC co-head of Asian Economics Research, and Joseph Incalcaterra, HSBC economist.

Department of Agriculture 7 Agribusiness Chief Gerry Avila noted that Cebu will possibly experience an increase in food prices with the El Niño. However, since Cebu is a transport hub, food prices can be neutralized.

Although he perceived that the El Niño will be mild, DA has ongoing consultations with the local government units in Central Visayas in determining their agricultural needs that will combat the effects of the dry spell.

He said the agency is currently identifying areas in the region where it will be distributing drought-tolerant rice varieties. Such crop requires less water, he said, but has lesser yields compared to those that are normally planted by farmers.

DA also maintains a buffer stock of seeds, planting materials, and pest control chemicals.

“The Philippines is no stranger to food price disruptions due to natural considerations. In this season alone, the country has already been hit by a few.

Moreover, the Philippines had to deal with the sizeable impact of Typhoon Haiyan well into 2014, due to widespread damage to food supply chains,” the HSBC report read.

Bangko Sentral ng Pilipinas corporate affairs office director Fe M. de la Cruz in an earlier interview when she was in Cebu last May, said that while inflation threats are present with the El Niño, the central bank is optimistic that the country will maintain its inflation targets.

For June, the inflation rate was at its lowest for the past two decades at 1.2 percent.

Cruz said there are other factors to take note for inflation. “There are other sectors that are growing at a better rate, so there may be offsetting,” the BSP official said, adding that the country has been recently consistent in maintaining its inflation target between three and five percent.

Meanwhile, to combat the effects of drought, the Cebu Provincial Government has handed out seeds and food packs to some 500 farmers affected by the dry spell.

Cebu province was placed under a state of calamity due to the effects of a prolonged dry spell last May 25.

In this time of lesser yields, Avila advised consumers to be responsible rice consumers.

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