AS RECESSION looms, one silver lining could be lower food prices in the coming months.
VOICES
'This crisis is a lot deeper than we think. It's going to last for quite a while. As far as NTUC FairPrice is concerned, we're actually seeing a lot more customers buying things. Why? To me, this is an indicator that people are tightening their belts, because the best way to stretch your dollar is to cook and eat at home. So that reinforces what we are seeing at FairPrice.
Our policy at FairPrice, as a market leader, is we will do what we can to be the last one to adjust prices up, but the first to adjust prices down. Rice is one good example.
Global commodities have taken a beating in recent weeks as investment funds flee volatile markets and slowing economic growth worldwide dampens the demand for raw materials.
The Reuters-Jefferies Commodity Research Bureau Index, which tracks a basket of 19 commodities, has fallen more than 34 per cent from its peak in July.
The price of rice has also dipped. The benchmark Thailand rice recently fell below US$700 (S$1,040) per tonne for the first time since a global buying frenzy gripped the market in March, according to Reuters.
Chye Choon Foods managing director Jimmy Soh confirmed that prices have eased since the record of $1,400 per tonne a few months ago. His firm is importing rice at around $900 per tonne now.
He reckons there is 'still a bit more downside' before prices stabilise, as the financial crisis worsens.
Soya bean, the base for beancurd, soya bean oil and soya sauce, has plunged about 46 per cent from its July peak to US$8.98 per bushel.
Commodities across the board - not just food, but also metals such as platinum and copper - have also fallen, the exception being gold, often considered a safe haven, said OCBC Bank economist Selena Ling.
'There's a lot of demand disruption at the moment, so commodities are reacting strongly,' she said, adding that prices could slide a further 10 per cent.
'But how far down it will go will really depend on how long this turmoil will last.'
Mr Goh Chong Theng, the general manager of Rabobank International, which finances agricultural ventures, said it was only a matter of time before the fall in soft commodity prices worldwide trickled down to lower food prices here.
'If cost components come down on the back of weak demand, food prices will naturally follow,' he said.
Although Singapore has been struggling to beat inflation in the past year, it may see deflation in the coming months on the back of the fall in crude oil prices, he added.
OCBC's Ms Ling, however, said there may be a time lag before consumers see cheaper groceries.
A spokesman for supermarket chain Sheng Siong said that although global commodity prices have been falling, 'the impact on grocery prices on our shelves has yet to be felt'.
'We have not received any downward price revision notice from our suppliers for most of the products we carry,' she said.
Rice and vegetable oil, however, are now priced lower at the chain.
Mr Wong Mong Hong, the deputy president of the Singapore Food Manufacturers' Association, said palm oil prices had dropped from the $1,000 per tonne level to about $500 to $600.
He said food manufacturers have been transferring the drop in the cost of raw food materials to hawkers, adding: 'If we don't, we won't be competitive.'
If consumers have not felt the benefits, it is probably because the fixed overhead costs of retailers - such as rental and energy costs - have gone up, he said.
Mr Seah Kian Peng, an MP and managing director of FairPrice, said the supermarket chain had a policy of being the last to adjust grocery prices upwards and the first to adjust them downwards.
'If prices come down, we will be the first to adjust down,' he said.
Businessman Lim Gek Heng, 45, said he had seen a slight drop in food prices. A 10kg bag of rice now costs about $22.80, down from $26 two months ago.
