Philippine food inflation remained high in recent months. Soaring prices for staples such as rice and sugar fueled the rise. But there may be relief on the horizon for Filipino consumers as global commodity prices start to retreat.
Factors contributing to high food inflation
Food inflation in the Philippines has outpaced the country’s headline CPI over the last two years. Soaring energy costs, supply chain disruptions from the Russia-Ukraine war, severe weather conditions and protectionist measures by major food exporters have all contributed to this trend. India’s ongoing restrictions on the export of rice, sugar and other essential commodities have further disrupted the market, leading to soaring food inflation in import-dependent nations like the Philippines.
Philippine headline and food inflation
Source: PSA, Tradingeconomics.com
Rice prices drive April inflation figures
In April, Philippine food inflation accelerated to six percent, outpacing the 3.8 percent headline inflation rate. Rice prices, which surged by 23.9 percent year-on-year, remain a key driver of inflation. Given its substantial weight in the CPI basket, rice alone added 2.1 percentage points to the headline figure.
Sugar prices decline from 12-year highs
However, the prices of key staples are showing signs of easing in recent months. Global sugar prices have declined by 32 percent from 12-year highs. This decline was driven by improved weather conditions and record harvests in major sugar-producing nations. Brazil’s sugar exports surged by 78.1 percent in Q1 2024, while India and Thailand also increased output, reversing previous supply tightness.
Source: Bloomberg
Rice prices fall as global exports increase
Rice prices have also fallen by 10 percent from their December 2023 peak due to increased rice exports in Q1 2024 from Thailand, Vietnam, Pakistan and the United States. These exports have compensated for the reduced exports from India after it restricted non-Basmati rice exports in 2023.
Source: Bloomberg
Potential relief for Filipino consumers
While food inflation remains elevated, the falling prices of rice and sugar offer a glimmer of hope for Filipino consumers. The impact on grocery prices may be delayed due to a lag effect, but a sustained decline in these key staples could eventually ease household food expenses and alleviate broader inflationary pressures.
Philequity Management is the fund manager of the leading mutual funds in the Philippines. Visit www.philequity.net to learn more about Philequity’s managed funds or to view previous articles. For inquiries or to send feedback, please call (02) 8250-8700 or email ask@philequity.net.