The evolution of unprocessed food inflation in Turkey: an exploratory study on select products

Abstract

Food price increases stem from economic, agricultural, and political factors. Understanding the dynamics behind the food price formation process and assessing how potential factors contribute to food price changes will significantly affect policies formulated to manage food price increases. High food inflation rates have been a chronic problem in Turkey over the last decade, with unprocessed food prices rising faster than general price levels. In this article, we use exploratory analyses based on economic principles rather than econometric analyses. First, our results indicate that exchange rates are strongly associated with domestic food prices due to dependence on imported inputs. Second, deep-dive analyses on select products show that global price movements and pass-through prices from producer to consumer are not solely responsible for price increases.

The impact of some animal products on agricultural gross domestic product in Türkiye: A time series analysis

“…The increase in migration from rural areas in Türkiye since the 1980s, a lack of shepherds because young people do not want to live in villages, and the fact that people in villages have been forced to migrate to cities due to terrorist incidents in the eastern and southeastern regions of the country, which are important livestock centers, have all had a negative impact on small cattle breeding activities (Acıbuca and Budak, 2021). Furthermore, because milk prices were not adequately supported despite the increase in input prices that began in the Covid-19 period and is still ongoing (Demirkılıç et al, 2022), the decrease in cattle presence and the increase in imports had a negative impact on both cattle breeding activities and milk production value. Although sheep milk had a production value of 0.8 billion dollars in 1980, it increased to 1.1 billion dollars only in 2019 in the 40-year period examined.…”

Food Price Bubbles: Food Price Indices of Turkey, the FAO, the OECD, and the IMF

“…Food production, CDS spreads, interest rates, fertilizer prices, and raw-material prices, exchange rates, oil prices, fastest growth in exports, low productivity, rising input costs (Agriculture-PPI 2015 = 100 April 2013 index value is 804.64), inflation expectations, demand-side pressures of a growing population, changing consumer preferences, and supply-side elements such as low productivity, dominant players in the retail industry preventing price competitiveness, cost of capital, migration and aging rural populations, low productivity, agricultural education, and problems in the food supply chain are some of the reasons for the formation of food price bubbles [92][93][94][95][96][97][98]. Exchange rates have a strong impact on domestic food prices in countries that are highly dependent on imports of energy, fertilizers, and chemicals [99]. Agricultural policies are seen as falling short of expectations, with import decisions and agricultural support causing harm to farmers and domestic production in the long run [98].…”

Unraveling the Major Determinants behind Price Changes in Four Selected Representative Agricultural Products

“…The determinants in a general context are mostly identified as the exchange rate, consumer price index (CPI) or food price index, GDP, and money supply [35,37,[74][75][76][77]. On the other hand, findings obtained by Tay Bayramoglu and Koc Yurtkur [74] show that the dollar and euro exchange rate are the most important international factors affecting food industry prices in the short term.…”

“…Despite their limited impact, oil prices, international food prices, and agricultural producer prices are found to affect food prices in the long term. Similarly, Sahin Kutlu [77] and Demirkilic et al [37] highlight the significance of the exchange rate on food prices. Alev [75] asserts that while inflation is positively affected by the interest rate applied to money supply, budget deficit, and general purpose loans in the long run, it is positively affected only by the money supply and budget deficit (balance) variables in the short run.…”

“…Additionally, while the World Bank's agricultural price index increased by 6 percent in 2020, Türkiye experienced a rate of 18 percent [36]. The primary reason for this discrepancy is attributed to domestic factors, particularly the weak exchange rate, as indicated by Demirkilic et al [37]. Trade restrictions such as import quotas and high tariffs rates are also cited as contributing factors to domestic inflation in Türkiye by IMF [38] and WTO [39].…”