Wheat Prices go up 50 Percent-Repercussion for Ghana

Press Release by Food & Beverages Association of Ghana

A food price crisis is now looming in emerging economies like Ghana. The UN Food and Agriculture Organization (FAO) has announced a cut in its 2010 global wheat forecast by about 4 percent and said world wheat supplies may shrink next year if severe drought continues in Russia, the World’s leading wheat producer.

Wheat and other Cereal prices have jumped by more than 50 percent since June and are likely to rise further due to expectations of tighter supplies. There are concerns about a repeat of the food crisis in 2007/08 that forced interest rates higher in many countries. Russia the biggest producer of Wheat has imposed a temporary export ban in response to a record-breaking heat wave.

Higher world wheat prices could put an upward pressure on inflation and possibly interest rates in emerging market economies like Ghana.

We in Food and Beverage Association of Ghana (FABAG), believe that this development must be of concern to Ghana. It means wheat prices and their by-products such as bread, biscuits and spaghetti will rise sharply thereby impacting negatively the Ghanaian consumer. This will consequently have an effect on the prices of other food staples such as maize and rice.

In addition due to the poor rainfall pattern in the country this year with a potentially poor crop output, local food production appears not to be in good standing. With food constituting about 50% of the consumer price index of Ghana, a lot of people stand to be driven into relative poverty if government does not proactively re-examine some of its fiscal policies that directly relate to food prices.

There has, already, been a general decline in consumer demand due to high prices of goods and services resulting in increased smuggling activities. We are aware of the government’s recent efforts to combat smuggling but the continuous disparity in the tax and import duty levels between Ghana and its neighbors does not help in the fight.

With the downward trend in inflation in recent times, FABAG believes that government will have to quickly act in order to sustain the benefits that the lower inflation brings. In view of the recent fluctuations in commodity prices we urge the government to act boldly to mitigate any possible negative effect on the Ghanaian economy.

Signed; Nabil Moukazil

Chairman