Price rise

By Jessica Lim & Lee Pei Qi, ST

That bowl of rice is going to cost more, following a worldwide jump in grain prices.

Supermarket chain NTUC FairPrice, the island’s biggest with 80 stores, which had been holding out on raising prices of its house brand rice, gave in yesterday as global grain prices shot up 30 per cent overnight.

It raised the prices of three inhouse varieties by 10 per cent to 15 per cent, the first hike since the middle of last year, when the goods and services tax went up, said a spokesman.

A 5kg bag of FairPrice Thai White Fragrant Rice now costs $5.30, up from $4.70, and a 10kg bag of Double FairPrice Thai Hom Mali Rice now goes for $17.90, up from $16.25.

Prices of non-house brand varieties of rice at FairPrice and other supermarkets have gone up, as and when suppliers had adjusted prices.

The latest adjustment follows skyrocketing world grain prices, which have jumped 50 per cent over the past two months and at least doubled since 2004.

On Thursday, the prices of Thai rice, a global benchmark, jumped 30 per cent to an all-time high of US$760 (S$1,050) per tonne after Egypt – a leading exporter – imposed a formal ban on selling rice abroad in a bid to stabilise soaring prices at home.

Prices now fluctuate with each shipment, say importers here.

Previously, exporters used to keep prices unchanged for three to six months at a stretch, said the owner of rice importer Chye Choon Foods, Mr Jimmy Soh, who supplies rice and noodles to supermarkets and about 700 provision shops.

‘For us now, prices change each time we get new supplies. Exporters also ask us to top-up prices stated in old contracts,’ he added.

He and four other companies that import rice and manufacture rice noodles or bee hoon have already told customers to expect prices to go up again next Tuesday by about 20 per cent.

Last year, Singapore imported 326,854 tonnes of rice, with close to 60 per cent of it coming from Thailand.

Vietnam and India make up another 30 per cent, with the rest coming from another 15 or so countries, including just over 2,000 tonnes from Egypt.

But as more countries impose export restrictions, importers here are worried about securing supplies.

Said rice importer Goh Hock Ho, managing director of Saga Foodstuffs Manufacturing: ‘Countries are tightening their supplies. Vietnam is now not renewing their contracts to small companies like us. Now the whole world depends on Thailand.’

The price hikes have already reached hawker stalls.

A bowl of rice at Madam Han Yei Liang’s chicken rice stall went up from 50 cents to 60 cents two days ago.

It is the first time she has raised prices at her two-year-old stall, even though her costs have jumped every week over the last month, she said.

She now pays $12 more per 50kg bag of rice, compared to a month ago, and was warned that the price would go up again by $3 next week.

Said the 50-year-old owner of Rui Kee Hainanese Chicken Rice on North Bridge Road: ‘I try to absorb the price first because I do not want to lose customers. But the price increase over the last month is just too much and too scary.’

Scouring the world to keep your food affordable

By Jessica Lim, ST

Pork from South Africa. Fish from Namibia. Eggs from the United States.

These are not the usual sources of produce sold in Singapore, but with prices from traditional suppliers heading ever upwards, importers are expanding their horizons.

The reason: If prices get too high, consumers stop buying, and importers’ bottom lines take a hit.

So importers are casting their nets far and wide for everything from staples like rice to meat and vegetables.

Meat merchant Jack Koh, 59, used to get his supplies from Malaysia and Thailand. Now he imports from Canada, Brazil and New Zealand as well.

He said: ‘We try to explore new sources all the time. It’s a contingency plan, even if we do not buy from them in the end.’

Checks showed that at least 10 meat importers have widened their supply sources in the past year.

Mr Koh is the president of the Meat Traders’ Association, whose members are scouring Vietnam, Sabah, Sarawak and South Africa for suppliers.

‘We must spread out from the north, east, south, west, to everywhere. Anything can happen, and if we do not make sure prices stay down, our customers will stop buying meat. When they suffer, we suffer too,’ he said.

When the hunt is over, what results is a fresh platter of chow.

Already, Namibian fish is available at NTUC FairPrice outlets. The chain was the first to bring in a seven-tonne shipment from the south African country last year. And recently, it also started stocking Vietnamese rice, which is about 20 per cent cheaper than that from Thailand.

More supplies from non-traditional sources are on the horizon. In time, eggs – 90 per cent of which come from Malaysia now – might be imported from the US.

Mr Tan La Huah, the former chairman of the Eggs Import/Export Trading Association, said that importers here are holding discussions with US egg suppliers and at least one importer has already turned to the US for its supply.

‘We are comparing prices before we decide if we should import American eggs,’ said Mr Tan, who brings about 72,000 Malaysian eggs into Singapore every week.

‘If we do, another 20 tonnes of these eggs will be available here every month.’

Even the Agri-Food and Veterinary Authority (AVA) has got in on the act.

Its spokesman, Mr Goh Shih Yong, said that the AVA ‘works with the industry to facilitate the imports of food from diverse sources at competitive prices’ and makes efforts to keep the ‘market accessible so traders can bring in food items’.

So far, the agency has given new suppliers in Belgium, Brazil, China, France, South Africa and Taiwan the green light to export frozen pork to Singapore.

It also recently approved Taiwan as a new source of frozen duck.

Supermarket chain Cold Storage works with more than 200 suppliers from all over the world to produce the 1,600 items on its shelves.

The massive effort to locate new sources is motivated to a large extent by rising food prices worldwide.

The prices of staples such as rice, wheat, corn and soya beans have all risen sharply, hitting record highs.

Wheat price increases have pulled up prices of flour-based products like bread and noodles. Prima Food – which supplies about 60 per cent of flour to manufacturers here – has raised its flour prices twice in the past three months.

Rice prices have risen, and supermarkets here have upped the price of a 10kg bag by about $2.

Consumers are feeling the pinch.

Mr Augustine Chua, 56, a production manager who earns about $1,500 a month, said: ‘I buy house brands now and more frozen food than before.

‘I also eat more tofu and less meat. But now the price of tofu, and even rice, is also going up.’

Importers have to look for new sources or risk a repeat of the Great Vegetable Throwaway: About a month ago, many wet-market stallholders had to throw out greens imported from China, after customers baulked at buying because prices almost doubled after severe weather in the country affected supply.

But how does sourcing food from afar help to bring prices down?

There are two ways, said Mr Koh.

When importers diversify their sources, they are no longer at the mercy of one supplier.

Having a choice of suppliers means the buyer’s bargaining power goes up, said Mr Koh.

Also, when exports from one place are stemmed – say, because of weather or a bird-flu epidemic – importers and manufacturers can switch to other suppliers easily, and are not held hostage to high prices caused by supply shortages.

Of course, all this is good for the businesses’ bottom line as well.

‘By searching for cheaper food sources, importers manage to keep their profit margins up,’ said Mr Thomas Pek, the managing director of Tai Hua Food Industries.

‘It is a win-win situation – our customers benefit from cheaper products and keep coming back to us.’

But however hard the suppliers look to diversify their sources, more price hikes are on the horizon.

A recent United Nations assessment predicted that food prices would continue to increase for the next few years and would, in fact, ‘rise in 2008, 2009 and probably at least until 2010′.

In the meantime, consumers will have to hope for news of the sort provided by Mr Png Geo Lian, the chairman of The Association of Chinese Wheat Flour Merchants of Singapore.

He says that importers are moving away from the ‘conventional supplies of wheat from places like Canada, America and Australia’ and tapping sources in China, where ‘wheat is cheaper by about $10 per 25kg bag’.

GIC, Host Hotels in property venture

By Chua Hian Hou, ST

The Government of Singapore Investment Corporation (GIC) has teamed up with a New York-listed real estate investment trust to invest up to US$2 billion (S$2.8 billion) in Asian and Australian property.

The Singapore firm’s real estate arm and Host Hotels & Resorts, one of the world’s largest owners of luxury hotels, have set up a joint venture with an initial investment of up to US$600 million. This, combined with anticipated leverage, will provide total investment potential of at least US$1.5 billion.

Host, which will provide fund management services to the venture, will own a 25 per cent stake while GIC will hold the remaining 75 per cent.

GIC Real Estate president Seek Ngee Huat said the combination of ‘Host’s core skills in hospitality investment and asset management, and GIC’s regional presence and network’ would serve the venture well.

This places it in a good position to ‘build up a substantial portfolio of hospitality related assets in Asia’.

GIC Real Estate, one of the world’s top 10 real estate investment firms, has a multi-billion-dollar portfolio in more than 200 property-related investments across 30 countries, according to the statement announcing the venture.

Last month, GIC reportedly paid about 80 billion yen (S$1.1 billion) for the 438-room Westin Tokyo hotel, and in January, it announced a joint venture to develop a residential township near Moscow.

MPs raise concerns as power rates inch up

By Natalie Soh, ST

The latest increase in power tariffs has pushed the electricity rate to its highest level in eight years.

On Wednesday, SP Services, a subsidiary of Singapore Power, announced that for the next quarter, from April to June, electricity will cost 23.88 cents per kilowatt-hour (kWh).

This is a rise of about 5 per cent over the 22.62 cents per kWh consumers are paying this quarter.

The increase means a family living in a four-room HDB flat, using the average of about 355 kWh a month, will pay about $85 a month for electricity – a $12 increase over April 2006, when oil prices began their march to the current highs.

Just last week, oil hit an all-time high of US$110 (S$153) a barrel on Monday, although it fell to US$104 a barrel in trading on Wednesday this week.

In Singapore, electricity rates for homes are adjusted every quarter, depending on market circumstances.

Despite the rapid rise in oil prices, power tariffs have remained relatively stable: In April 2006, the tariff was 20.49 cents per kWh, barely three cents lower than today’s rate. In the same period, the price of oil has jumped by more than US$25 per barrel.

But Members of Parliament contacted by The Straits Times say their constituents are starting to feel the pinch.

Madam Halimah Yacob, an MP for Jurong GRC, said it was a question of timing: Although the electricity rate hikes are small, they come at a time when prices of other commodities are also going up.

As Mr Charles Chong, an MP for Pasir Ris-Punggol GRC, put it, ‘in some cases, the power price hikes tip them over the edge’.

But Dr Amy Khor, an MP for Hong Kah GRC and mayor of the South West District, said: ‘We cannot shield our residents from rising costs, which arise from world events and markets.’

She added: ‘Much of it is imported inflation. But our assurance is that there is help if people need it.’

Chinese firm buys Tuas Power for $4.2b

By Michelle Tay, ST

Temasek Holdings has sold Tuas Power to a Chinese company for $4.24 billion – well above its initial valuation of $3 billion five months ago.

The deal with SinoSing Power, the wholly owned subsidiary of Chinese power company China Huaneng Group, is expected to be completed by March 24, said Temasek in a statement yesterday.

It will mark the end of the bidding process that began last October, when Temasek announced its plan for the sale of the first of its three wholly owned power generation companies (gencos).

Mr Wong Kim Yin, Temasek’s managing director of investments, said yesterday: ‘China Huaneng is an established player with a strong track record in the power business. Its proposal through SinoSing was the most attractive.

‘It emerged as the winner based on clear considerations of price and acceptable commercial terms.’

Analysts said the sale marks Temasek’s largest-ever divestment in dollar terms and the biggest acquisition of a Singapore company since 2001.

Sources close to the deal told The Straits Times that the $4.24 billion price tag is testament to the strength and stability of the Singapore economy and an endorsement of the growth potential of electricity demand in the Republic.

Tuas Power has a capacity of 2,670 megawatts (MW) and accounts for over a quarter of Singapore’s electricity generation. This means it is worth $1.6 million per MW it generates.

Temasek plans to sell off the two remaining power plants by the first half of next year.

Analysts speculate that Power-Seraya, which has a licensed capacity of 3,100 MW, may be worth $4.96 billion, while Senoko Power, with 3,300 MW, may be worth $5.28 billion.

The state-owned investment company has not indicated which will be sold next.

The plants were transferred from the state to Temasek between 1995 and 2001, on the understanding that it would eventually sell all three companies.

Selling the three gencos is a key step in freeing up the domestic energy market and has been in the pipeline for six years.

Power generation is considered to be a part of the energy market; competition is viewed as healthy for this sector and should be introduced. Private ownership of the gencos should ensure a competitive market and more players can be expected to enter the market as Singapore’s power needs grow.

For the moment, market watchers say that a change in ownership will not affect electricity prices because the three gencos have been operating independently, competing against each other.

Beijing-based China Huaneng is the largest power generation company in China and also owns a 50 per cent stake in Australian power generation joint-venture firm OzGen. It has an installed capacity of 71,000 MW and total assets for the group exceed US$45 billion.

China Huaneng vice-president Huang Long said the transaction was a major step for his company ‘in its goal to diversify its assets across geographies and technologies’.