Higher output costs will lead to food price hikes, more investment overseas: NFI

Rising costs at home will also encourage more food producers to invest overseas, mainly in Asean, the institute said.
“The rising cost of labour, fuel and utilities here will encourage food producers to raise their retail prices in the next few months, while some enterprises will shift to investing overseas,” NFI vice president Amorn Ngammongkolrat said yesterday.
The NFI study found that the prices of more than 70 per cent of food products had increased, while only processed fruit, tapioca products and feed-meal prices had dropped, thanks to lower raw-material prices.
Because of higher prices, Thai food export value is expected to top Bt1 trillion, at an estimated Bt1.01 trillion, for the first time this year, representing growth of 5.1 per cent from last year.
However, the NFI said export volume would be unchanged as food production would grow by just 1.3 per cent, against the 5.1 per cent achieved last year.
Under the cost structure for food manufacturing, about 70-80 per cent is down to raw materials and 5-10 per cent to labour, with the remainder accounted for by fuel, utilities and transport.
With the increase of the daily minimum wage to Bt300 in some provinces, and after higher fuel costs and a hike in electricity |costs this month, the average margin of food enterprises will drop from more than 20 per cent last year to 16-18 per cent, said the national think-tank on the food industry.
The NFI also pointed out that company margins, in particular those of small and medium-sized enterprises, would depend on their adjustment capabilities.
Amorn said food producers would not raise retail prices in the immediate term because of the government’s price-control measures. Moreover, some companies have stockpiles, which means they can maintain their prices for a few months longer.
However, after the stockpiles run out, these producers will have to raise their prices as they will no longer be able to bear higher production costs, he said.
Sales volumes are also expected to be unchanged in the short term, he added.

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Products that will receive the greatest impact from higher labour and fuel costs are drinking water, milk and canned food.
Amorn said rising domestic production costs would also encourage more Thai enterprises to invest overseas, particularly in Asean, in search of raw materials and cheaper labour, as well as export privileges for targeted |markets.
He cited the seafood, seeds |and feed-meal sectors as having the highest potential to expand overseas. NFI vice president Orawan Kaewprakaisangkul said that because of higher production costs, many local enterprises |would also concentrate more on innovation and increasing their productivity.
“Producers will focus on innovation to enjoy more added value from new products, as they cannot easily increase prices for existing products,” she said.
Meanwhile, to support the food industry, the NFI will press ahead with its main task of promoting Thai food quality and flavour development.
It will spend Bt75 million on organising the “Thailand Food Quality to the World” project, which aims to boost exports, encourage more standardisation among food enterprises as well as promoting Thai cuisine recognition in the global market, Orawan said.
The institute will also support the setting up of a one-stop service to assist local entrepreneurs in producing quality foods for supply to the domestic and overseas markets, she added.