Tariq A. Al-Maeena
AT the beginning of this year I read a report, which included some input from food traders and market analysts. They confidently predicted that if the trend of lower oil prices at the time continued, then food prices would definitely decline by 10 to 15 percent across the board.
At the time no one could have predicted that the decline of oil prices on the global market would be a sustained one, and that the fall in prices would only materialize in three to four months after the current inventory purchased at higher prices would have been exhausted.
They also cautioned that this decline would not greatly impact locally produced items as compared to imported goods as the price of oil in the Kingdom was fairly stable and not governed by international market forces.
According to a member of the Committee of Food Products at the Jeddah Chamber of Commerce, prices of food products would decline by about 10 to 15 percent, especially as shipping prices control at least 15 percent of the final price of a product and vary depending on the country of import. He opined that the decline ‘would take time to be evident due to the large amounts of food purchased at higher rates and because food contracts are signed for a period of six months.’
With respect to the demand for imported consumables, he stated that there were products that did compete with imported items, but customer preference and loyalty was towards items from abroad, which they perceived to be of better quality and were willing to pay a premium.
He felt that local food manufacturers should raise the bar and improve the quality of their products to match the imported ones, particularly those coming from the West.
The report also carried an analysis from another member of the Chamber of commerce who said that “there are no indications that the declining price of oil will impact the price of food within the next two months, but if oil prices continue at their current price of $58 per barrel or less, the price of imported foodstuffs will decline within six months.” He also believed that the impact on locally manufactured goods would be minimal, ‘especially as the price of raw materials remains fairly steady.’
Speaking on the comparisons between locally produced products versus imported products at the time of the report, Dr. Hamza Aoun, a member of the Trading Committee at the Jeddah Chamber of Commerce, reiterated that competition was the key element that set market prices and that consumers did not change their shopping patterns very easily.
Once hooked to a product, they would continue in its purchase until a better alternative at a cheaper price came along. He did agree though that the forecast for lower prices of goods on the supermarket shelves was reasonable within three to four months if oil prices stayed at current levels.
Well guess what folks? It’s been more than ten months since the report was published and prices on the shelves show no sign of a slowdown or decrease. It’s no secret that oil prices had been steadily declining and have been at their lowest levels in the last few years and yet the decline has failed to materialize in the form of lower prices.
Is there a reason? It would be reasonable to assume that shipping costs would decrease to reflect the decrease in the price of fuel, and thus would reflect on the price of goods been transported. But such is not the case when the consumer is confronted with the final tally on his or her grocery bill. It will definitely not have shown any savings from before.
So what’s a consumer to do other than complain to the Ministry of Commerce about the greed and price gouging by food importers and distributors? Eat less, I suppose!
— The author can be reached at talmaeena@aol.com. Follow him on Twitter @talmaeena
