UAE: Why are food prices on the rise?

Food prices in the UAE and worldwide have been on the rise mainly due to high freight rates, oil prices and the ongoing Russia-Ukraine military conflict.

Major retailers in the UAE told Khaleej Times that freight rates have substantially increased and there is also a shortage of vessels which is a major contributor to the price hike within and outside the UAE.

However, retailers assured that they try to minimise the impact of any price increase due to external factors and try not to pass on the burden to consumers and absorb some of the impacts.

They hailed the Ministry of Economy’s efforts to regularly monitor the prices of hundreds of most sought-after basic commodities in the country to ensure that the prices remain competitive and fair for the consumers.

On Wednesday, the ministry said it’s regularly monitoring more than 40 outlets and cooperative societies across the country to keep the prices in check. It also announced a new mechanism under which suppliers will have to seek prior approval and submit evidence to justify an increase in the prices of basic commodities. This group includes more than 11,000 commodities including fresh and dry milk, fresh chicken and eggs, bread, flour, sugar, salt, rice and legumes, cooking oil, mineral water and others.

Kamal Vachani, group director and partner at Al Maya Group, attributed the increase in food prices to transportation and packaging costs.

“Freight rates have gone up more than 20 per cent which has resulted in an increase in food prices. In addition, Ukraine was also a major supplier of sunflower oil globally, hence cooking oil prices also rose for the importers,” said Vachani.

The World Trade Organisation this week revealed that the UAE was among the top 25 importers of wheat and sunflower from Ukraine and Russia in 2019. It said 51 per cent of UAE’s total wheat imports came from Russia and one per cent from Ukraine in 2019 while 73 per cent of sunflower oil was imported from Ukraine and seven per cent from Russia prior to the pandemic.

Dr Dhananjay Datar, chairman and managing director of Al Adil Trading, said the prices have increased 5 to 10 per cent in the last 4-5 months mainly due to a surge in freight rate.

“For example, freight rate from India to UAE has shot up from $50 per container to $1,100. In addition, freight rates on Europe and US routes are quite high, too, rising from $2,500-$3,000 per container to $9,000-$10,000. Therefore, shipping companies are more interested and deploying vessels on those routes. While vessels on the Gulf routes have become less,” he said.

Dr Datar added that edible oil prices have increased in the UAE and worldwide due to the Ukraine conflict, which is a major exporter of edible oil. “Once the war stops, the prices will come down.”

Al Adil added that their prices have not increased because they have their own company in India to export foodstuff to the UAE. “I am a buyer and a seller at the same time. That’s why we, at Al Adil, are able to maintain stable prices.”

“We are setting up our sourcing hubs across the world in the US, UK, Spain, Turkey, India, and the Far East and other regions which will primarily help us eliminate the middle man and ensure price stability and product availability,” said Nandakumar, adding that uninterrupted supply and food security are the group’s key objectives and it works in tandem with the government to achieve this objective.