Increasing Domestic Agriculture Key to Preventing Food Inflation

Despite a slight slump in food prices in September, an economist says increasing local agricultural production is key to protecting Cambodia from food inflation.
Factory workers buy food in Phnom Penh. Kiripost/Siv Channa
Factory workers buy food in Phnom Penh. Kiripost/Siv Channa

Despite food prices in Cambodia slightly decreasing in September compared to the previous month, some food products will remain expensive in the long-run, which impacts Cambodian food supplies and livelihoods. To save Cambodia from food inflation, the Kingdom needs to boost more local agricultural productions, said a Cambodian economist.

The World Food Program (WFP) has released its ‘Market & Seasonal Monitoring Upgrade’ report for September, focusing on the effects of the global food and fuel crisis on food prices and market functionality. It also illustrates food prices in September compared to October.

Economic analyst Ky Sereyvath told Kirpost on Monday that the rising price of food affects low-income households and the stabilized-income livelihoods of Cambodians. He added that increasing agricultural production in the country is key to unlocking food price inflation.

“The solution is our country must boost more domestic productions [agricultural products] in order to help combat the food crisis.”

He explained, “Every country produces tactical goods. For instance, in Korea, despite the booming industry, agricultural products are still produced to support food supply.”

The FAO Food Price Index (FFPI) has dropped since July as global prices for vegetable oils ease. In September, it was -1.2 percent month-over-month (MoM) and remains 5.5 percent higher year-over-year (YoY). The Cambodia Food Price Index (FPI) decreased by 0.4 percent MoM but remains 4.4 percent YoY, according to the WPF report.

Prices of gasoline decreased by 5 percent MoM, while diesel prices increased by 2 percent MoM in September, according to the Ministry of Commerce (MoC). However, prices remain high 14 percent and 45 percent YoY for gasoline and diesel respectively, and may still negatively affect food production and transportation.

In September, the cost of a basic food basket (BFB) dropped slightly by 2 percent MoM, and increased 1.8 percent YoY, to 108,918 riels/person/month, which is equivalent to $26.60.

On average, the BFB costs slightly more in urban areas which are $26.90; -2.2 percent month-over-month than in rural areas which are $26; -1.3 percent month-over-month. Most food commodities in the basket exhibited only marginal price fluctuations (±<5 percent MoM) in September, except for morning glory (-7.8 percent MoM).

Despite some easing, some food commodities still show substantial long-term price increases, such as morning glory (+28.9 percent YoY), vegetable oil (+20.4 percent YoY), which is mostly imported, and duck eggs (+14.7 percent YoY).

Market functionality improved notably throughout September, with the Market Functionality Index (MFI) rising to its highest value since the beginning of this year. This increase was driven by improvements in the physical availability of essential goods in sufficient quantities and the predictability of prices.

Along similar lines, the number of customers visiting markets improved throughout the reporting month which was likely due to increased consumer demand associated with the Pchum Ben festival.

Despite some easing, fuel prices in Cambodia remain high. Moreover, flash floods in parts of the country, coupled with continuously high prices for fertilizer, may negatively affect domestic food production in the mid-term as agricultural inputs become less affordable.

The number of customers who visited markets improved markedly in late-September 2022, after dropping in the first week of the month, reaching its highest value this year. This was likely due to increased consumer demand during the Pchum Ben festival which was celebrated from September 11 to 26.

In September, average retail prices for most key food commodities, except mixed rice and vegetable oil, were higher in urban areas.

The average retail prices for mixed rice, snakehead fish, pork, duck egg and vegetable oil, in both rural and urban areas showed minor fluctuations under 5 percent compared to the previous month.

The price for morning glory decreased by 2.9 percent MoM in rural areas and 9.9 percent MoM in urban areas.

Conversely, the price for sweet potatoes increased by 7.9 percent in rural and 1.9 percent in urban areas respectively.

Soaring oil prices coupled with a cyclical economic slowdown in the US and China, Cambodia’s largest trading partners are key factors dampening economic growth in Cambodia, which is projected at 4.5 percent for 2022.

In Asia Pacific, Cambodia is among the​ countries most exposed to rising energy prices owing to its comparatively high net fuel imports relative​​ to GDP, limited domestic access to electricity, and reliance on fossil fuels.