Even as consumers battle price inflationary pressures while the economy recovers from the novel coronavirus pandemic, Jamaica Broilers Group Limited (JBG) has announced that a 10 per cent price increase will be applied at the end of January.
“It's incredible what's happening, and it's so aggressive that it's not funny,” stated a Christopher Levy, president and CEO of Jamaica Broilers, in a call with the Jamaica Observer late Thursday evening.
“Well, I think what's happening is that we have continued cost increases across the entire operation, including corn, soy, and a lot of other raw materials which have been impacted. Jamaica is a price taker on a lot of things. If you look at oil, oil has moved aggressively. I think, without a doubt, the challenge the country faces in terms of inflation is not over,” Levy added.
JBG reported in its second quarter results up to October that its gross margins had fallen from 24 per cent to 20 per cent as a result of increased input costs which was partially mitigated by the growth in the company's USA operations. Despite revenues for Jamaica moving up by 31 per cent to $20.44 billion for the first six months of 2021, its segment result decreased by 13 per cent to $1.53 billion.
Point-to-point inflation for 2021 was 7.3 per cent, which is a five-year high and remains well above the Bank of Jamaica's (BOJ) upper inflation band of 6 per cent. The BOJ increased its policy rate from 0.50 per cent to 2.50 per cent in the last quarter, with its next monetary policy committee meeting set for February 18.
Inflation in the USA hit 7 per cent for 2021, which is the fastest pace of price increases in four decades. Inflation remained above 6 per cent in the USA for the third-consecutive month up to December and is well above the Federal Reserve's desired range of 2 per cent. The Fed has already signalled that it intends to hike interest rates three times in 2021 to combat inflation and has already scaled back its balance sheet expansion in recent times.
Apart from highlighting the significance of a double-digit price increase on JBG's products, Levy cautioned that wages might have to increase shortly based on the rate of price increases in the country.
The National Minimum Wage currently stands at $7,000 a week and has stood there since August 2018 when it increased from $6,200. The Jamaica Employers Federation submitted a proposal in 2021 for the minimum wage to be increased, but the labour minister is yet to make an announcement on the proposal.
“Every manufacturer and importer is going to face the same thing, and I'm sure everyone is moving prices along demand. The challenge that is going to be faced in the longer term is going to be the impact on wages. There is no doubt that there are going to have to be wage increases, and that in itself fuels inflation,” Levy contended as he worries about the first quarter.
Oil prices have hit a seven-year high as West Texas Intermediate (WTI) prices closed at US$84.52 ($13,185.12) a barrel. Oil prices went negative in April 2020 but have rebounded at a pretty aggressive pace. Blackrock LP and Goldman Sachs both indicated in recent times that they expect oil prices to hit US$100 a barrel with Blackrock CEO Larry Fink indicating that the energy shortage could lead to a lot of unhappiness and social unrest in some countries. Corn and wheat prices have gone up by 62 per cent and 44 per cent, respectively, since the start of the pandemic to US$6.10 a bushel and US$273.50 a ton.
Managing director of Jamaica Flour Mills Derrick Nembhard told Caribbean Business Report in December that more difficulties will be expected in 2022 as the price of corn, wheat, and soya bean continue going higher.
“We're in a very delicate stage and I know that the minister of finance and folks are very aware of all that's facing the country, but we're not alone in this fight. If you look what's happening in Sri Lanka, it's a very serious situation happening over there. I think good governance and a steady head is really what's required at this point,” Levy explained about the price hikes being felt across the globe, but particularly in countries which have been hard hit by the decline in tourism.
Sri Lanka is currently facing an economic crisis whereby it has run out of fuel to run its power stations amid a foreign exchange crisis. This has left the South Asian country in a difficult choice of paying down debt or buying milk, gas and medication.
The National Water Commission (NWC) recently indicated that consumers should expect higher bills in February while the Jamaica Public Service Company (JPS) noted that electricity bills will get more expensive as the Jamaican dollar depreciates and oil prices trend higher.
Caribbean Cement Company Limited recently hiked the price of cement by 8 per cent, while Caribbean Producers Jamaica Limited noted in an interview on Taking Stock with Kalilah Reynolds that revenues have increased, but not volumes, which has been due to price increases. The cost of transport has gone up to $150 for a trip in the Corporate Area, while a beef patty now costs $220.
“I'm very concerned about the first quarter numbers for the country, and I feel that we're going to face a lot of headwinds as a country right now. I do feel that if we can weather this storm, we'll be better for it. We have to realise that we're in some short-term pain now not brought on by anything we've done, but we have to work and recognise that there's a tomorrow,” Levy closed.