Rising grain prices in the United States could translate into a 15-per cent increase in poultry prices by the end of 2007, according to the US Department of Agriculture's (USDA's) Foreign Agricultural Service (FAS), while the price of bread may go up by as much as 20 per cent.

According to the FAS's Global Agriculture Information Network (GAIN) report, published at the beginning of July, the retail price index for poultry and meats in Jamaica jumped to a 10-year record during 2005, and further price increases should track higher than overall strong international demand for US coarse grains.

Jamaica's annual demand for feed grains and soybean meal are fulfilled by imports from the US, 80 per cent of which is consumed by the poultry industry.

This, coupled with a 25-per cent increase in corn prices faced by domestic producers during last year and the projected 36-per cent increase for 2007, translates into a 13-per cent increase in poultry prices in 2006, and the 15-per cent increase expected this year.

Chicken meat prices already rose by five per cent during the first three months of 2007.

Poultry meat accounts for an overwhelming proportion of animal protein consumption in Jamaica, which means that movements in the price index of meat and poultry products are largely determined by poultry prices.

But consumers are also expected to face increasing proportions of subsequent grains and soybean price changes as they relate to other food commodities as US grain prices rise.

"Prices of the two major wheat-based staples (flour and bread) have increased above overall inflation during 2006 and are projected to increase by a further 15 per cent and 20 per cent, respectively, during 2007," said the GAIN report.

According to the FAS, "easier shipping logistics and the ownership of Jamaica's sole wheat flour mill by US interest - Archer-Daniel Midland Company (ADM) - influence the dependence of the domestic bakery industry on United States wheat supplies."

Flour and bread are major parts of the Jamaican diet, thus household expenditure, especially for the lower income groups, is extremely sensitive to adverse adjustments in wheat flour prices.

According to the FAS, movements in the poultry industry and retail bakery prices are restricted by socio-political factors, which means that retail prices are "generally adjusted to reflect historical and/or projected movements in input prices".

But price increases for 2006 and 2007 have been directly related to increases in grain prices, and the capacity of firms in these sectors to absorb adverse changes in input costs diminishes under contracting profitability.

As a result, "larger portions of input price changes are expected to be directly transferred to consumers".
This means that both poultry and bakery products will face price increases larger than overall inflation, projected at single digit for 2007.

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