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Damages Over Nate Expected To Fuel New Increases In Food Prices

An expected lower supply of vegetables, some fruits, meats and dairy products due to damage caused by Tropical Storm Nate to crops and livestock could mean higher food prices as early as next month.

According to the information published this Friday (Oct. 6) by the National Institute of Statistics and Censuses (Instituto Nacional de Estadística y Censos – INEC), the index of food prices increased by 2.76% in September, compared to the same month of the previous year.
This means that if for example, a household spent ¢10,000 colones on food a year ago, it now has to spend ¢12.760 for the same purchases.

The La Ligia farm, in Parrita, where rice, pineapple and melon are planted, was one of those affected by the Tropical Storm Nate. (Jeffrey Zamora, La Nacion)

This result is above that of the general prices index, which increased 1.64% in September 2017 compared to the same month of the previous year.

This behavior reinforces an upward trend in food prices that began at the end of 2016.

Expected Effects Of Nate

Agriculture and Livestock (MAG) Minister Luis Felipe Arauz, explained that they do not yet have information on areas of crops damaged by Tropical Storm Nate, but explained that when these types of events occur the price of some foods goes up.

“We do not have the data of losses, but yes, when there is this type of events the price of the vegetable always rises, for several reasons. First, there is loss and second a lower harvest,” commented Arauz.

The minister explained that the heavy rains complicate fumigation, giving rise to plagues and when they can, farmers tend to apply more agrochemicals to avoid disease and fungus issue, that all influence prices.

Economist Manuel Zuniga commented that, possibly, there will be an increase in prices in dairy products (fresh milk and cheese) and meat production (for the loss of livestock) due to lower supply.

“The fact that producers will not be able to provide the usual or scheduled quantities to the market will cause a certain level of shortage, causing a relative scarcity of these products, reflected in upward pressures on their respective prices. If so, the statistical collection of the behavior of the prices of these foods, eventually, would reflect a price increase towards the last quarter of this year,” said the economist.

When it comes to rice and palm oil, the effect may take a little longer. Because they are non-perishable products, there is an existing supply and more can be imported to meet the demand, mitigating an impact on prices.

For economist Luis Mesalles, the impact will be felt faster with perishable foods, with higher prices as early as next month (November).

Poorer Households Will Be Affected Most

Food is the most important group in the budget of lower income families. The increase in food affects poor households more because their expenditure represents more of their total expenditures than those of other households.

According to the latest National Survey of Revenues and Expenditures, food represents 21.4% of their total expenditures.

Among the foods that national households devote more resources to are: beans, potatoes, papaya, avocado, apple, banana, onion, tomato, watermelon, and pineapple. Some subgroups of products whose value has accelerated in recent months are pork, chicken, and fish.