Why Do Prices and Stock Availability of Frozen Foods Vary So Much?
What is the Real Reason Food Prices and Stocks Vary?
A question like this is on the lips of many Westco clients as hospitality comes back to life and the country begins to shake off the paralysing effects of a pandemic that has gripped the globe for the past 2 years. Here we outline some key factors in the equation.
The food and drink trade plays an important part in all our lives from the weekly shop to the restaurant and as Trinidad & Tobago relies heavily on imported foods, Westco, and other suppliers like us, have been faced with not only the challenges that were present before but also new and more significant ones.
In this blog, we seek to sum up a few of these challenges to help our customers, and the population at large, understand the reason behind increasing prices.
Currency Swings and How This Influences Prices
As most frozen food is imported from the USA, Europe, Canada, the United Kingdom, and other nations that have to be paid in either their currency or USD, foreign exchange rates have a significant impact on the cost of the food to the end-user.
It is important to understand the relationship of the Trinidad and Tobago Dollar (TTD) to other currencies in the FOREX market. The TTD is a floating exchange rate against the USD.
Here we have shown a graph showing the February 2021 – February 2022 fluctuations between the TTD and USD and a live chart showing an up to date average rate for the TTD against 4 major currencies.
This graphically shows just how much variation there has been, and this directly impacts frozen food product prices as they are primarily imported, and overseas suppliers need to be paid in foreign currency.
This goes some way to explaining why imported food products like beef, salted fish, pigtails, and other products, can be quite noticeably up or down in price from one week to the next, month to month or year to year.
Some links here help with explaining the T&T Central Bank’s role in regulating the currency and what a floating exchange rate is:
https://www.central-bank.org.tt/about/our-mission/exchange-rate-management
https://www.investopedia.com/terms/f/floatingexchangerate.asp
Supply, Demand, And Seasonal Factors
There will always be peaks and troughs in demand related to seasonal events – like turkey being in demand for Christmas time, fish and seafood in the Lent season and other such factors.
These events are not only local but put an increased demand, on a somewhat fixed supply, on global food suppliers.
It also can’t be denied that Trinidad and Tobago are not the largest markets in the world for popular lines – a good example being popcorn chicken – if a market the size of Japan, for example, wants this US-made product, it is, unfortunately, going to get preference over our Islands.
At Westco Foods we have had a few conversations with you, our customers, about this hugely popular product – we simply can’t satisfy high demand because of lack of supply.
Unfortunately, COVID has exacerbated this challenge as workers have had to self-isolate in factories with some facilities being forced to close as the workforce was decimated. This then has led to a reduction in supply when the demand remains which drives the price up due to the economic law of scarcity.
Stockpiling food products ahead of anticipated demand, by buying at lower ‘off peak’ prices, rarely offers a viable answer to volatile prices because of the issue of expiry dates on food products and other health and food regulations.
The Role of Logistics
Along with the sheer destructive effect of the pandemic on actual food production facilities and companies, there is a considerable shortage of shipping containers in recent times. This has led to both a spike in prices and delays in shipping, the problem is at its worst with Asia, but is affecting food products being shipped from Europe as well.
Nils Haupt, of Hapag-Lloyd shipping, commented on the Ship Technology website:
“We are desperately looking for more capacity,” he says. “We are asking our customers to return empty containers earlier. We looked at containers that are currently in repair or ones which are meant to be sold because they have reached a certain age.
Please see also the Kuehne + Nagel website: https://home.kuehne-nagel.com/-/knowledge/market-insights/container-shortage
With the exit of Britain from the EU trading area there are now extra customs checks and paperwork because of Brexit affecting goods from the UK; particularly if goods are, for example, shipped on the route: Hull – Rotterdam – Port Of Spain.
Our Commitment – Quality Foods And Fair Pricing
These factors amount to a challenging time for the food and drink trade but at Westco Foods we are rising to this challenge in innovative ways.
Our customers are allocated a dedicated sales representative to discuss your requirements and ensure that they get the best quality frozen food products, on time, and at a reasonable price. This gives a reassuring and reactive point of contact focused on anticipating and meeting your needs, so you have less supply chain headaches.
We promise to always charge competitive fair prices for quality products to the foodservice and hospitality trades.
Please request a call from your sales representative to be set up with your personal pricelist and account on 1-868-235-5020 or email: info@westcofoods.com.