Whither local food production?

Jamaica imports huge sums of basic food input, records large trade deficit with rich nations

BY STEVEN JACKSON Business writer jacksons@jamaicaobserver.com

Friday, October 25, 2013

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LAST year, Jamaica imported over US$500 million ($51 billion) worth of basic goods including sugar, fish and beans from some of the richest nations in the world, according to global trade data.

The island's heavy reliance on imports is well known, but it's the dearth of local production in the most basic of food items that becomes glaring.

Of the basic goods imported, the country recorded a US$171 million trade deficit in cereals and a US$71 million deficit in meats led by US and Canadian imports in 2012, according to Caribbean Business Report-analysed data from the International Trade Centre - a joint agency of the UN and World Trade Organisation.

The US$54 million deficit from dairy and egg products stemmed largely from imports from the US followed by New Zealand, while a US$31
million deficit in fish and seafood resulted from substantial imports from Norway and Canada.

Moreover, the Caribbean country, which is a long-time sugar producer, realised a US$2.5 million trade deficit in sugar and confectionery led by imports from Colombia and Guatemala.

Local manufacturers say that procurement overseas is a function of pricing, availability and quality - essentially, the country of origin with the best balance of the three factors will win supply contracts.

Large conglomerate GraceKennedy sources half of its purchases locally, and the remainder from some 40 nations globally. Some examples include: Grace brown sugar in sachet from Ireland; Grace Sardines, which is a product of Poland; Grace Oats from the US; and Grace Aloe Vera juice product of Thailand.

"Our choices of primary supply sources are more and more driven by the availability, competitiveness, quality assurance and marketproximity of the respective materials and manufacturing facilities," said Don Wehby, GraceKennedy's CEO.

The food and financial conglomerate annually supplies itself with $4.4 billion worth of goods produced locally at its five factories and buys $2.3 billion worth of goods from other local manufacturers each year, but the group has to source products outside of Jamaica "where neither the materials nor manufacturing capability exists on the island, or where other sources provide a sustainable comparative advantage in their
production and supply", according to Wehby.

Even then, sometimes local producers source primary goods from developed economies, rather than locally or regionally, to satisfy a preference by domestic consumers for international tastes, according to an expert affiliated with Lasco Distributors.

For instance, Lasco Raisin Bran is made in Germany, while its broad beans and baked beans are products of Italy.

"Lasco does not do anything in a vacuum," said the key source affiliated with Lasco who opted for anonymity out of respect for protocol of principal Lascelles Chin who was travelling at the time. "It gets samples worldwide from different facilities and manufacturing companies and [Lasco's choice] is based on the taste, quality specifications and also the price.

"Have you ever tried the baked beans... Lasco doesn't just stick to one region but rather goes to areas that have the core competence in what they produce. So that particular region [Italy] would have the advantage in beans per se."

The Jamaica Manufacturers Association (JMA), which touts the slogan 'Buy Jamaican build Jamaica', argued that despite the high level of imports of basic goods, local manufacturers are actually taking market share from foreign companies.

"Consumers are demanding these products which would have been traditionally filled by international companies," said a joint response from JMA president Brian Pengelley and JMA research manager Kamesha Turner Blake.

"Local companies have sought to capitalise on this opportunity through brand Identity. Additionally, this practice is not unique to Jamaican companies; local manufacturers are replicating rebranding and reselling practices which are done by other top international manufacturers, in the process, creating jobs and increasing Gross Domestic Product,"
they explained.

The JMA concluded that many developed countries have what is called an "absolute advantage" in producing certain products, because they own the raw materials and equipment needed to produce large quantities.

It's not all gloom. Jamaica recorded trade surpluses in regard to vegetables, cocoa, coffee, and yam, among
other things.

"Various countries have products that they have a comparative advantage, for example Jamaica with ginger, pepper, cocoa and coffee and so on, that we are able to command high premium prices globally as a result of quality," said the JMA. "Therefore the differentiation is who can supply at the
best quality and price,
which is dependent on a country's resources.

"The JMA is a strong advocate to strengthen linkages and seek investment opportunities in areas that are feasible for Jamaica, for example, pepper and orange concentrate and look to produce more value-
added products. We need to
move away from producing
primary products which
are processed in other countries and
re-imported to Jamaica as
an intermediary or finished product."

Jamaica's total imports during the first six months of 2013 dipped 4.0 per cent to US$3.1 billion year on year, according to data from the Statistical Institute of Jamaica. This movement, paired with flat exports, resulted in a 5.4 per cent dip in the trade deficit over the review period to US$2.2 billion from US$2.3 billion in 2012.


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