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Thu 6 Jan 2011 11:00 AM

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Food prices increase in the UAE

UN Food and Agriculture Organisation data says world food prices reached a record high in Dec - report

Food prices increase in the UAE
INCREASED PRICES: Food prices in the UAE rose by 11% in the first 11 months of 2010 (Getty Images)

The UAE’s food prices rose 1 percent in the first 11 months of last year, masking higher rises in the cost of basic foods, according to a report.

Staple items jumped in price in the past 18 months, with increases likely in 2011, The National reported on Thursday.

The latest data from the UN Food and Agriculture Organisation (FAO) said world food prices reached a record high in December.

Its food price index, which takes into account the average prices of staples including meat, dairy, cereals and cooking oil was up 25 percent, to 215 points, from the same month in 2009.

It topped the previous record, 213.8 points in June 2008.

The data credited the rise to increases in sugar costs and steeper market costs for oil, cereals and fats.

Jarmo Kotilaine, the chief economist at NCB in Saudi Arabia, told the newspaper that the market “has gone haywire… unpredictable market volatility is bad news for the Gulf."

In the UAE, rising commodity prices were symbolized by price hikes for Pepsi and Coke. Retailers say prices for staples including oil and sugar are also rising.

The Gulf imports 85 percent of its basic food requirements and is thus particularly sensitive to fluctuations in the global market.

Fluctuations led the UAE government to sign agreements with local retailers to freeze prices of basic food commodities in 2008.

Prices skyrocketed in the second half of 2009 after poor harvests in countries like Russia, stockpiling by China and India, and trade barriers which caused supply pressure.

At the moment, flooding in breadbasket Queensland, Australia, is triggering concerns on wheat and livestock prices.

Georges Mojica, general manager of Abu Dhabi Co-operative Society, told the National that local retailers would try to hold off raising their prices, so as not to push their customers towards competitors.

"There is competition on the shelves, competition in terms of other retailers. You don't want to start putting up the price. You wait until the last moment,” he said.

The paper conducted surveys of prices at local chains Carrefour, Lulu and the AD Co-operative Society, comparing costs to April 2009.

It found that Indian red soared in price since then, by 163 percent at Carrefour, 130 percent at the Co-op and 64 percent at LuLu. Cucumbers grown in the GCC cost 46 percent more than they did in April 2009 at Carrefour, and Dutch tomatoes 31 percent more at LuLu.

V Nanda Kumar, Lulu's head of communications, told the paper that natural disasters around the world had affected local food prices.

"Last year, because of floods and bad weather conditions in many parts of the world, there was a lack of supplies that led to an increase in some food prices," he said. "There was a lack of supplies despite a consistent demand, which drives prices up, but it was nothing alarming and nothing we expect to happen again any time soon.”

Supermarkets including Lulu plan to move towards buying directly from suppliers, in order to prevent shortages in the UAE.

"There is a lot of discussion with suppliers, definitely, and it seems like we're going to have some price increases in the coming months," Mojica told the paper. "For the moment it's pretty reasonable. Oil has gone up, sugar has gone up."