Government and the local business community are optimistic that a truce between Russia and Ukraine could further reduce the cost of living in Barbados.
In the early hours of Friday morning, news emerged of an agreement between the two warring countries, ending a Russian blockade that prevented Ukraine from exporting grain through Black Sea ports.
The reduced global grain supply had triggered price increases over the last six months. Over the last 24 hours, prices of key commodities fell in markets across the world in response to the agreement that was signed in Istanbul and supported by the United Nations.
Minister of Agriculture and Food Security Indar Weir was encouraged by the news, noting that reduced wheat prices could drive down the cost of fertiliser and animal feed, resulting in reductions in food production costs.
“I don’t know that there is any clear path as yet, but I welcome the news, and certainly if there will be benefits to be derived from a truce between Russia and Ukraine. Their ability to export grain would significantly reduce the cost of grains coming to the region, thereby reducing the cost of animal feed,” he told Barbados TODAY.
While acknowledging that the price of grain was gradually declining prior to the agreement, Minister Weir said he was hoping for a “full” reduction, particularly in the price of fertiliser.
President of the Barbados Chamber of Commerce and Industry (BCCI) Anthony Branker said the development was a “very positive sign”, though it was unlikely that price relief would be immediate.
“I think that it augurs well for the cost of wheat commodities in particular,” Branker told Barbados TODAY.
“As you know, the initial surge will obviously satisfy the demand that was built up. So I don’t think that we will benefit from that immediately. However, I do think because it is a worldwide traded commodity, we will definitely see prices locally being impacted by that freeing up of the shipping in the Black Sea,” he added.
Most of Ukraine’s wheat exports are shipped to countries in North Africa, East Africa and Asian countries. However, the void caused by the Russian blockade, along with sharp increases, triggered food hikes across the world, including in Barbados.
“It is always about supply and demand, and because the demand remained high but the supply was reduced we obviously then had the increase in prices,” Branker contended.
“Where you now have additional supply coming into the market, it will inevitably have a spill-off effect for similar suppliers of these wheat-based products. So, definitely, our other source markets will be impacted because the Ukrainian wheat crop was a significant player in the world market and therefore it will affect the world pricing regardless of where it is coming from,” he further explained.
To mitigate the impact of the recent increase in the cost of living, Prime Minister Mia Mottley announced a plan to reduce the Value Added Tax (VAT) on electricity and expand the list of essential food items that attract zero VAT. Simultaneously, key private sector players agreed to limit their markup on 44 items to no higher than 15 per cent.
Some livestock prices had previously also increased significantly due to sharp increases in the production cost and price of feed, of which wheat is a key ingredient.
Branker explained that a number of already zero-rated goods would be even more favourable when Barbados begins to benefit from the reductions in wheat prices.
“I think the trickledown to us is going to take some time but I would say that pasta products, cereal-based products – whether it is in the foods like corn flakes, oats, and other cereal-based products – all of those products would have been affected in one way or another,” he said.
The BCCI head added: “One of the products that I know is in the 44 items is corn flakes. So with the freeing up of the Black Sea exports, I think that the world supplies will obviously be increased and I think what we will see then is a net effect that the overall global pricing will soon be reduced.” (TD)
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