Food prices still not down despite dollar decline

The dollar continues its downward trend, and so far this year it has fallen by 6.04%, going from S/ 3,991 at the end of 2021 to S/ 3,750 in its last price. However, this decline is not yet reflected in the prices of some foods in the basic basket. According to specialists consulted for the note, this will not only depend on the exchange rate, but also on other factors such as world inflation.

Rise of commodities

Corn, wheat and soybeans —used for the production of bread, chicken and oil— have increased their international prices. The Directorate of Economic Studies, of the Ministry of Agrarian Development and Irrigation (Midagri), specifies that the price of wheat grew by 22% in 2021; hard yellow corn 12%; and hard yellow corn from Argentina 8%.

Ramón Diez Matallana, an expert in agricultural economics from the Agrarian University, explained that the value of grains continues to rise due to the severe drought that is hitting Brazil and Argentina; both producers and exporters of soybeans and corn.

”The rise in prices pushes a reduction in imports. 70% of the corn, 90% of the soybeans and 90% of the wheat are imported. To this must be added that the companies still have stocks that they bought with a high dollar,” said the specialist.

Figures from Agrodata show that in 2021 Peru purchased hard yellow corn for a total value of US$1,072,053,296 in CIF (includes import costs), 45% more than in 2020. Wheat purchases grew by 9.79 % after leaving US$ 740 million 164,502 and reaching US$ 1,072 million 053,296. For its part, the soy presented receipts of US$30,186; according to Midagri.

Logistics chain and rise in freight rates

The high price of oil and fuels also “raised the value of international transport freight and local transport,” said Omar Azañedo, CEO of Noncash, referring that there are still problems in logistics to import or obtain products.

Sabino Zaconeta Torres, general manager of the Peruvian Association of Maritime Agents (APAM), said that freight costs went from US$3,500 to US$15,000. Likewise, he revealed that since last year the ships transporting the grains take between 8 and 10 days to enter the pier in the north of Callao.

market structure

Juan Carlos Odar, director of Phase Consultores, admitted that a good trajectory of the exchange rate would not imply an immediate reflection if it occurs in a scenario that is not very competitive.

“The more competitive the market, the faster the transfer to the consumer will be than in one where there is a monopoly”, he explained.

Agrodata revealed that in 2021, Seaboard Overseas led corn imports, with US$ 323 million (30%). Meanwhile, Alicorp concentrated 35% of wheat purchases, with US$ 200,779,135 million.

Finally, the economist Javier Zúñiga said that “the drop in prices has to be proportional to the fall of the dollar, but it will not be something immediate, but in a period of between 3 and 6 months.”

Affected industrial inputs

Moisés Wolf, vice president of Asmarpe, explained that the cases of COVID-19 continue to affect the ports. “The shipping companies are desperate and in this situation they stop calling on the Shut up. This not only impacts importers, but also harms exporters of perishables”.

According to him BCRP, Industrial input prices had a growth rate of 27.4% in the third quarter of 2021.