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Cost of living is set to soar

Food prices may increase 30% as oil costs head up

Published on December 12, 2007



Consumers will be burdened with a higher cost of living next year as the domino effect of increasing demand for alternative fuel crops and skyrocketing oil prices push up food prices 10-30 per cent.

At a seminar yesterday entitled "Trends in the Livestock Industry: Sunrise or Sunset in 2008" held by the Thai Chamber of Commerce, all of the panellists agreed that prices of foodstuffs will increase significantly next year, due to rising costs of raw materials.

Increasing demand for alternative energy, which uses mainly agricultural crops for raw materials, has created a domino effect in agricultural production. For instance, farmers would turn to growing cassava, sugar cane and palm oil for production of gasohol and biodiesel instead of foodstuff as they normally did in the past.

Soybean and Rice Bran Processors' Association president Sethasan Sethakarun said the price of fuel crops would rise continuously, because of rising demand in the world market amid spiralling oil prices.

"The price of soybean meal, maize, cassava and rice bran will go up, because of higher market demand. This will directly affect the feed industry and related businesses, including livestock producers," he said.

At present, annual world demand for biodiesel is about 4 billion gallons, but that is forecast to increase 10-15 per cent a year, as it is an alternative to crude oil.

The Swine Raisers' Association of Thailand announced it planned to increase pig prices at the farm door from between Bt41 and Bt43 a kilogram to between Bt45 and Bt46 by the end of this month.

The price increase is meant to offset farmers' losses from a high of Bt46.50 per kilogram.

Next year, the association will also increase pig prices at the farm door to between Bt46 and Bt50 a kilogram. President Surachai Sutthitham said farmers faced higher costs driven by rising prices of raw materials, particularly soybean and maize. The prices of these materials have directly increased production costs 30 per cent.

Surachai said farmers have faced losses of Bt500 to Bt600 for each 100kg pig. The cost of production is expected to jump to Bt50 a kilogram next year.

Hen-Egg Farmers, Traders and Exporters Association president Narong Jiemjaibunjong said the cost of chicken feeding had been rising steadily since last year.

Egg farmers' costs are expected to rise 30 per cent, due to the higher costs of soybean meal.

"Farmers are facing losses because of higher production costs, but the retail price, which is below the real manufacturing cost, is controlled by the government," said Narong.

The production cost of one egg at present is Bt2.20. The price at the farm door should be Bt2.30 per egg, but it is only Bt1.80 an egg, he said.

Thai Shrimp Association president Somsak Paneetatyasai said the cost of shrimp production had been increasing 10-20 per cent. Thus, the price of shrimp should also increase next year.

Unlike this year, when shrimp farmers saw shrimp prices dropping from oversupply, shrimp farmers will control shrimp feeding based on market demand, in order to prevent the price dropping.

The association expects production of 500,000-550,000 tonnes of shrimp next year, up from this year's 530,000 tonnes.

Thai Broiler Processing Exporters' Association president Anan Sirimongkolkasem said chicken farmers were facing a higher burden from rising costs of feed meal. The chicken price is expected to increase slightly next year.

At present, the price of one chicken is Bt33.

However, due to the industry's greater reliance on exports compared with the past, chicken exports should next year slow down the aggressive increase in chicken prices. The association is targeting exports of about 330,000 tonnes of chicken next year, up 7 per cent in quantity and 10-15 per cent in value in US-dollar terms.

Thai Tapioca Trade Association president Chen Wongboonsin said tapioca price tended to rise, due to the high oil prices, which had sparked higher demand for ethanol. If the yield stays at the current level, it could affect the cost of animal feeds that use cassava roots as the main raw material.

He also called for the government to help raise yield per rai from 3.5 tonnes to 5 tonnes by 2012.

Chen said next year, cassava-root output could be 22.6 million tonnes, which is not sufficient to meet growing demand, which will require 24 million to 25 million tonnes. Demand is predicted to surge to 30 million tonnes by 2012.

He said demand would push up the tapioca price, because farmers might sell all of their produce for alternative energy, which would be a problem for the food industry.

Pornsilp Patcharintanakul, chairman of the Thai Chamber of Commerce's agriculture and food-industry committee, said the cost of production for feed and foodstuffs would increase next year, because of higher demand for raw materials.

To prevent a shortage of fuel crops and a crisis in the food industry, Pornsilp urged the new government to approve a genetically modified organism (GMO) plantation and the Biosafety Act for allowing GMO crop experimental planting.

He said GMOs were the major hope for fuel crops, which would increase yield per rai and prevent fuel-crop surges driven by high demand in the world market.

Petchanet Pratruangkrai

 The Nation


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