Raw material costs, not GST hike, behind higher prices of groceries

By Derrick A Paulo, TODAY
18 May 2007 1051 hrs

SINGAPORE: If you feel like you have been paying more for groceries in recent weeks, you are spot on — though perhaps not for the reason you might think.

From milk to Milo, cooking oil to coffee, canned foods, processed foods, wheat products and more, prices have been rising recently at supermarkets and hypermarts here.

Retail operators told TODAY that, since late last month, more food items have been affected. And it has set some shoppers wondering if profiteering is happening even before the Goods and Services Tax (GST) hike, from 5 to 7 per cent, kicks in in July.

Irked reader Joyce Ong told TODAY: “The GST hike has not yet been implemented, but the price of Nestle Carnation evaporated milk and Milkmaid condensed milk has already been increased from $1.10 to $1.60 ... Besides starting too early, isn’t the increase too drastic?”

Online, price increases are being compared on Internet chat forums, with many netizens attributing the inflation to the impending GST hike.

But various food suppliers told TODAY the higher tax has nothing to do with it. They blame the “tremendous cost increases” in raw materials for their moves to increase prices.

Cost pressures for dairy products, especially milk, are increasing worldwide, and especially in Asia and Africa as the supplies come from elsewhere. Demand in Asia is also rapidly increasing.

Bloomberg reported this week that China would increase demand by as much as 15 per cent annually for the next three years. This has “aggravated the situation”, Nestle Singapore communications and corporate affairs manager James Wong told TODAY.

Various factors have come together to create, virtually, a perfect storm, said analysts.

Australia has reduced milk exports because of its worst drought in a century. Reduced subsidies, meanwhile, have eliminated milk surpluses in Europe and slowed growth in its production in the United States.

Fuel and feed costs are affecting farmers, who may choose not to expand their herds.

All the food suppliers TODAY spoke to stressed that they are not passing on the full increase to consumers in Singapore. Mr Kenneth Low, assistant general supplies Magnolia products, said the recommended retail price of its fresh and pasteurised milk products were adjusted from May 4.

“F&N has absorbed a significant portion of the increased cost (of milk),” he said.

The prices of key ingredients in Milo have all increased, said Nestle’s Mr Wong. The price of skimmed milk powder went up 112 per cent year-on-year last month, cocoa prices rose 12 per cent “due to world supply”, and palm oil shortages jacked up prices by almost 40 per cent.

“We have increased our coffee prices by an average of 6 to 9 per cent, and Milo products by an average of 5.2 per cent,” he said. “Increasing world demand has pushed up Nescafe prices by almost 17 per cent. In fact, through increased efficiency in production, we have managed to lessen the burden of price increases as well as delay the price increase to consumers.”

Currency changes have also caused food prices here to go up. Del Monte Asia, which supplies processed foods here, buys and sells its products in US dollars. But the latter has depreciated and production costs are still in local currencies, said Del Monte Asia marketing director Catherine Chang.

“Our peaches, for example, come from South Africa where the rand has appreciated. So, prices have increased 6 to 8 per cent,” she said.

Supermarkets like Sheng Siong say they are doing their part to help consumers. Purchaser Alan Chan said the retailer is holding out against pressure from suppliers to increase the price of instant noodles.

NTUC FairPrice, which has promised to absorb the GST hike for a range of essential items, is mindful of its social role in the current scenario, said its director of integrated purchasing, Mrs Teo Poh Yim.

“When suppliers come to us with recommendations to raise prices, we always seek justification from them. We ourselves have to be convinced,” she said.

“Where possible, we want to be the last to adjust prices. For example, the cost price and recommended retail price for a particular brand of kaya increased, but we decided to sell it 10 cents below this price.

“Another supplier had increased the price for a brand of canned mushrooms in mid-March, from $1.20 to $1.30. We continued to sell it at $1.20 until April 27.” - TODAY/fa

Earth's Dirty Little Secret: Slowly but Surely We Are Skinning Our Planet

Mon 16-Apr-2007
Source: University of Washington

Newswise — Throughout history civilizations expanded as they sought new soil to feed their populations, then ultimately fell as they wore out or lost the dirt they depended upon. When that happened, people moved on to fertile new ground and formed new civilizations.

That process is being repeating today, but in a new book a University of Washington geomorphologist argues the results could be far more disastrous for humans because there are very few places left with fertile soil to feed large populations, and farming practices still trigger large losses of rich dirt.

"We're doing the same things today that past societies have done, and at the same rate," said David Montgomery, a UW professor of Earth and space sciences who studies the evolution and structure of the various aspects of the Earth's surface. In essence, he said, we are slowly removing our planet's life-giving skin.

"It only takes one good rainstorm when the soil is bare to lose a century's worth of dirt."

Montgomery is the author of "Dirt: The Erosion of Civilizations," in which he examines how soil is slowly created over time, the vital role it has played in the rise and fall of civilizations from Mesopotamia to Rome, and how it shaped where and how we live today. The 295-page book, published by the University of California Press, is a popular review of scientific literature on soil and farming practices.

In the past, as soil was depleted in a particular region – the American South during the height of tobacco plantations, for example, or the Great Plains during the Dust Bowl of the 1930s – people moved to new areas that could support their crops. But Montgomery argues that their primary farming method – plowing under any crop residue and leaving the surface exposed to wind and water erosion for long periods – was a major cause of the conditions that drove them from the land.

Flat lands and areas with thicker, richer soil tend to have less natural erosion, while steeper areas have greater erosion from both wind and water. Removing vegetative cover just worsens the problem, Montgomery said.

"If you take sloping land and strip the plants away, it leaves the soil bare and exposed. There will be a huge impact the next time it rains or when the wind blows," he said. "Plow-based agriculture can change the erosion rate of even a flat place like Kansas into the erosion rate of a place like the Himalayas. Basically that type of farming is remaking the surface of the planet."

When the Earth's population was smaller people could move from one place to another and give soil a chance to regenerate. But now, with more than 6 billion people on the planet, that option no longer exists, Montgomery said.

"We're farming about as much land as we can on a sustainable basis, but the world's population is still growing," he said. "We have to learn to farm without losing the soil."

He advocates a wholesale change in farming practices, moving to no-till agriculture, which he says would reduce erosion closer to its natural rate. That method would eliminate plowing and instead crop stubble would remain in the field, to be mixed with the very top layer of the soil using a method called disking. Farmers might need more herbicides to control weeds, but it would take fewer passes of farm machinery – and thus less fuel – to tend crops.

Currently about 5 percent of the world's farmers engage in no-till agriculture, the vast majority of them in the United States and Latin America, Montgomery said.

"We don't have to farm the way we do. It's as much a matter of culture and habit as it is of economics, and our habitual ways of farming have gotten people into a lot of trouble through the years," Montgomery said.

"It's more of a conceptual shift than anything else, but it's a conceptual shift that conserves the soil."

Charcoal Charm

The true kampung spirit is kept alive by this dying trade
By Kua Chee Siong
March 12, 2007
The Electronic New Paper

IT is slightly past 5am. The sky is still dark.

But Mr Chua Keng Siew has already started his 7km cycle from his Tampines St 43 home to work at Lorong Halus.

At 70, his legs are still strong.

As he turns left off Lorong Halus, he must pedal harder down an uneven track.

Flanked by tall grass, it is ridden with potholes that Mr Chua must avoid.

Peering through the morning darkness, guided only by the beam from a small light on his bicycle, he makes his way carefully down the track.

It takes him 45 minutes to get through.

Not only does he have strong legs, Mr Chua has strong hands too.

His job is to repack big sacks of charcoal into smaller bags for sale.

Most days, Mr Chua works alone in a warehouse. His boss is out delivering charcoal to clients.

Stray dogs and cats, and a small radio, keep him company.

The soft-spoken man, who was a coolie in his younger days, does not mind getting down and dirty. Showing his wrinkled, carbon-covered hands, Mr Chua said in Teochew: 'It's easily washed off. Just water and a little soap.'

It was just four years ago that Mr Chua met the owner of Ang Kee Huat Charcoal Trader, and was offered a job packing charcoal.

He was overjoyed.

The $600 monthly salary helps to pay his rent and living expenses. Mr Chua lives with one of his two sons in a one-room HDB flat. His son is an odd-job worker.

He works 12 hours a day, five days a week, and says he has never called in sick or missed work.

Every day, Mr Peter Ang - who works in another charcoal warehouse three units away from Mr Chua - cooks lunch for everyone. It is simple fare: steamed fish, vegetables and porridge.

The workers wait at Mr Ang's warehouse for latecomers to arrive before tucking in together.

Charcoal 'Village' Dealers have to vacate land

By Joyce Lim
March 12, 2007
Electronic New Paper

A GROUP of workers sitting on borrowed land, on borrowed time, plying an almost forgotten trade.

Then came a very wet blanket: a pool of water to drown out their fire-starters.

Charcoal dealers working from warehouses at Lorong Halus have been given until June to move out of their premises, located between Punggol and Pasir Ris.

They are upset, as it was only two years ago that they spent good money renovating their warehouses.

They were told by officials that the site would be affected by the Public Utilities Board's proposed Serangoon Reservoir Scheme, to be carried out over the next 10 to 20 years.

Admittedly, the dealers should have expected this day.

They have only temporary occupation licences, and the HDB is required to give only a month's notice for them to vacate.

One of the oldest dealers, Mr Goh Choon Chor, 68, recalled how they were told in 1987 that they could stay for only three years and had to build temporary warehouses themselves.

'But year after year, the HDB did not have any plans for this
site,' he said.

The dealers are upset that urbanisation has brought attention to their charcoal haven.

Mr Peter Ang, 51, one of the workers, said: 'In the past, nobody knew of this place. It's only in recent years that people discovered us because there were wakeboarding activities along the river.'

Defence Minister Teo Chee Hean has also recently mooted the idea of turning Lorong Halus - with its the rugged terrain and river crossings - into an adventure site.

They were first informed of the need to vacate last October. Another letter arrived in January.

Yet, the dealers have yet to find another site for their operations.

They are doubtful about their ability to pull off another 'comeback'.

They arrived in Lorong Halus after their shops in Kampong Arang ('coal village' in Malay) in Tanjong Rhu had to give way to public housing estates in 1986.

They swiftly recovered then, building warehouses from scratch in just two months.
DYING OUT

But it is a dying trade. As the rent increased - from $300 in 1987 to about $1,800 per unit per month today - many dealerships could not survive.

There used to be about 20 charcoal shops here. Six are left.

They import charcoal from Indonesia and Thailand, then resell it to Hong Kong, Japan and Taiwan.

They also repack the big sacks of charcoal into smaller packs for supermarkets and restaurants here.

Two years ago, the dealers spent tens of thousands of dollars restoring the badly weathered warehouses.

One tenant, who declined to be named, claimed: 'An officer from the HDB advised us to renovate them. We wouldn't have spent the money if we had known that they would take the place back so soon.

'We thought that we could stay for at least another five years.'

Mr Goh is anxious.

He said: 'Many of our businesses are run on credit. We are not cash-rich. Moving to a new place will require more money.'

There is a more immediate worry. Mr Goh, who earns between $1,000 and $2,000 a month, must now find a way to store the 2,000 sacks of charcoal, each weighing 50kg, still stacked in his warehouse.

Eyes peeled for another site

AN HDB spokesman told The New Paper on Sunday that when the charcoal operators were relocated to Lorong Halus in March 1987, they had been told that - on vacating those premises - they would have to find another location on their own.

Also, the Temporary Occupation Licence (TOL) agreement states that no compensation will be paid by the HDB, and no alternative site need be given, should the TOL be revoked.

However, the HDB is regularly in touch with the charcoal dealers to keep them informed of any suitable HDB factories that may be up for tender.

The spokesman said: 'We had arranged a site visit for the operators to view a vacant factory at Defu last November.'

Sun is setting on KELONGS

Too expensive to keep afloat, many owners are calling it a day
By Hedy Khoo
February 10, 2007
The Electric New Paper

HIS weather-beaten face is furrowed from long hours in the sun. His hands are leathery and calloused from years of hauling nets and fishing lines, repairing planks and hammering nails.

After all the back-breaking work, he gets to sleep only an average of five hours a night.

And all this to stay in a money-losing business.

Despite the drawbacks, Mr Ng Chow Meng, 55, a kelong owner and fish farmer, is unwilling to let go.

'This is a very tough life, but after so many years, it is the sentimental value of this place that keeps me going each day,' he said in Mandarin.

The kelong business is dying, and needs fish farming to survive. And even that may not save it.

But it's not easy for Singapore's few remaining kelong owners to give up.

'I won't be a rich man, but happiness is not measured by money alone,' said Mr Chow Chan Yuen, 62, who sank $120,000 of his CPF into buying a kelong and fish farm after retiring as a mechanic.

'I love my life at sea. Plus, I don't have a boss to order me around. I can spend days at sea without stepping on the shore. As long as I can earn enough to sustain myself, I will not give up.'

But Mr Chow, whose family lives on land, gives himself just three years, before he abandons the kelong and holds on to only the fish farm next to it.

FEW LEFT

There are only 15 kelongs left in Singapore waters. Since the '80s, the Agri-Food and Veterinary Authority has not issued licences for kelongs as they are not commercially viable.

It is instead encouraging the fishermen to take up fish farming, as a more sustainable approach to fish supply for Singapore, said Mr Chin Yew Meng, the AVA's deputy director of food supply.

There are 99 fish farms, 12 of them alongside kelongs.

COSTLY KELONGS

A kelong is an offshore structure which uses wooden stakes to lead and trap fish, and it is costly to build and maintain.

Mr Ng spent $100,000 to buy his kelong in the Johor Straits, near Kranji, in 1985. Since then, he estimates he has poured almost half a million dollars into maintaining it.

The kelong's long wooden poles, made from wood from the nibong tree, each costs $55. The cost of driving each poles into the seabed can be three times the cost of the pole itself.

A kelong requires an average of 1,000 nibong poles. The wooden planks that make up the bulk of the structure cost about $120 each to replace. And then there are the wire mesh, cages and nets.

According to Mr Ng Hua Heng, 41, who provides maintenance and building services to kelongs, just replacing old poles can cost $20,000 to $30,000 each year.

Fish farms are cheaper to maintain because they do not require the expensive nibong poles, but they are more labour intensive.

'I used to have eight workers, but I had to let them go in 1998,' said MrNg Chow Meng. 'Business had turned bad and the labour cost was too high. I had to spend up to $20,000 a month on salary, meals, diesel costs and maintenance of boats.'

Now he runs both his kelong and fish farm alone.

Mr Kat Ah Sing, 76, who survived a fire on his kelong last year, with estimated losses of $40,000, said he has no savings.

He earns only about $1,000 a month from his kelong, with a similar amount from his fish farm, and said there's almost nothing left after deducting expenses.

Mr Chow and Mr Ng Chow Meng gave similar figures.

'In the '70s, my average earnings could hit $8,000 a month,' Mr Kat said. 'My nets were filled easily with a variety of big fish. But since the late '80s, my catch has dwindled.

'Now, it is almost impossible to catch any big fish. All I can get is small fish suitable to be used as feed for the farm. If I get fingerlings of more marketable fish, I keep them in the holding nets of my fish farm and wait till they get bigger to sell.'

He added: 'I am looking for someone to buy my kelong and fish farm. I know I will be very bored when I have to return to living on land, and I can't bear to give up, but I am getting old.

I have no-one to hand the business over to.'

Mr Ng Chow Meng also said that from 1989, his catch started to decline both in quality and quantity.

In 1994, he built a fish farm next to his kelong, but it was still tough.

So, in 1996, he also started rearing imported crabs, which can be sold after 20 days.

Now he retains his kelong mostly to catch small fish to use as feed for his crabs. He thinks this is better than buying the feed. But still, he figures he can sustain his kelong for another five years at most.

'The kelong is draining away the money I earn from the crab rearing,' said MrNg.

'I have no money to set aside for my retirement.

'I live one day at a time. I only hope that my three children have enough filial piety to provide for my old age.'

Could tourism be a way out?

Unfortunately not. Tourists are not allowed on kelongs because of safety concerns.

Kelongs are built for commercial fishing, and not for holiday-making, the AVA said.

The sunset may look glorious from a kelong. But sadly, this has become a sunset industry.