Economists: Food prices not solely dependent on fuel prices

Economists: Food prices not solely dependent on fuel prices
While the drop in fuel prices would result in cheaper transportation costs, other aspects going into the production of food, such as supply of raw goods and labour costs, had not gone down.

PETALING JAYA - Food prices do not depend solely on fuel prices, but other factors as well, including supply of goods and the attitudes of traders, say economists.

Alliance Bank Malaysia Bhd chief economist Manokaran Mottain said: "The price of fuel is an external factor in determining food prices, but there are internal factors as well such as inflation, supply and even traders' attitudes."

He explained that while the drop in fuel prices would result in cheaper transportation costs, other aspects going into the production of food, such as supply of raw goods and labour costs, had not gone down.

"Factors such as the floods and the crackdown of illegal immigrants in Cameron Highlands, which have affected the supply of fresh vegetables, also influence food prices," he said.

Manokaran said the attitude of traders was also a major reason.

"When fuel goes up, even by five sen, they raise the prices of food, but when fuel prices drop, they cite other factors such as supply to keep prices high," he said.

Towards this, he said there needed to be more regulation by the Government to prevent traders from profiteering unreasonably.

He said if fuel prices continued to stay low for a year, the prices of food should see reductions as well.

Malaysia University of Science and Technology's School of Business dean Dr Yeah Kim Leng agreed.

"Food and fuel prices are inherently more volatile due to greater fluctuations in supply, demand and market conditions," he said.

"So, lower fuel prices do not necessarily translate into lower food prices.

"Lower fuel prices have reduced inflationary pressures, which means that there is a lower tendency for prices to rise," Dr Yeah said.

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