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Effect of rise in rice prices on Singapore

Here's an article about the effect of rise in rice prices on Singapore:

What price, rice!
For many restaurants and food stalls, recent global spikes in rice prices come on top of other cost increases. -ST

Sun, Apr 06, 2008 The Straits Times
Written by: Alex Liam

For many restaurants and food stalls, recent global spikes in rice prices come on top of other cost increases.

But a Sunday Times survey of 100 restaurants and hawker stalls across the island found that while 20 have increased their prices, the other 80 intend to absorb the price hike for now.
Most cited loyalty to regular customers, maintaining their brand name and staying competitive as their key reasons.

Rice-eaters have two other reasons to cheer - 96 of the 100 polled said they have not cut back on the amount of rice served, and 99 said they have not downgraded the quality of rice being used, at least for now.

Global rice prices have shot up by more than 30 per cent to more than $1,000 a tonne, and major producer countries have cut back on exports.

At home, NTUC FairPrice has increased the prices of its in-house rice brands by 10 to 15 per cent. The Government has repeatedly assured Singaporeans that the supply is adequate.
Meritus Mandarin's Chatterbox, famous for its Hainanese chicken rice, will keep the prices of its rice-based dishes unchanged.

Said Ms Cindy Lim, the hotel's assistant communications manager: 'We feel rice is a staple, so regardless of the price hike, there has been no change in our portions and prices.'
Its chicken rice remains at $21.50.

Crystal Jade Group's spokesman Daphne Chang said it will keep the prices and servings of rice and rice-based dishes unchanged for now.

The 20 eateries which have increased their prices blamed it on too many costs going up at the same time.
RiceTable Indonesian Restaurant Singapore, which has three branches, is one of them.
Director Kevin Sih said: 'Everything has increased, from gas to oil to food like fish and chicken. And the rising price of rice was the final straw. It was a decision that had to be taken.'

Its buffet lunch now costs $23.90, up from $19.90 two months ago.
The extent of increase varied but most fell within the range of 20 to 50 cents.
Some 37 restaurants and food stalls said that if no relief was in sight, they would up the prices of rice and rice-based dishes.

Another four would reduce the amount given and three would serve rice of lower quality. Twelve would retain the same pricing while the rest declined to comment.
The Big Bird Restaurant in Bukit Timah said it would rather raise prices of other goods.
'Rice is an important staple and we will not touch its price. If we are under pressure from rice price hikes, we will increase the prices of other dishes such as fish,' said manager Betty Chen.

The owners of two stalls in People's Park Complex selling chicken rice and economical rice respectively felt that raising prices will upset regular customers.

The rise in operating budgets is, however, not uniform across the board.
Boon Tong Kee Kway Chap and Duck Rice said its costs have gone up by up to 20 per cent while Hong Kong Jin Tian Roasted Rice and Noodles' increased by 5 per cent. The difference is largely because of different quantities of rice used.

Higher prices will hit those who usually ask for more rice.
Mr Hong Shao Chun, 39, a supervisor with Hyundai Engineering, said: 'I ask for extra rice quite often and additional rice used to cost 30 cents. Now it costs up to 70 cents at some places. If it rises to a dollar, I think I will forgo it.'

Victoria Junior College student Ian Tan, 16, was pragmatic about the current situation. He said: 'If rice becomes costly, I might turn to wheat-based noodles. But if even that rises, I guess we'll just have to live with it.'

Analysis:
Now that rice prices have risen, should food stall owners rise the price of the food they sell?

Since Singapore is well-known to be a food haven, there is a very large number of food stalls in Singapore, providing Singaporeans and tourists with a large variety of food to choose from. It is very easy to buy food in Singapore since there are restaurants, coffee shops, markets,food courts and fast food restaurants almost everywhere. Hence the demand for food(meals ) in Singapore can be considered to be price elastic since there are many available substitutes. This means that a rise in price of meals would lead to a more than proportionate decrease in demand. In this case, it is not advisable for food stall owners to raise the price of the food they sell unnecessarily.

The recent rise in rice prices has led to an increase in cost of producing food items and meals. When this happens, most food stall owners would try to increase the price of their food to maximise their profits as well as to cover the rise in cost. However, I feel that since demand for food is so price elastic in Singapore, it is not advisable to raise the price of the food some customers may be turned away by the higher price. This would affect demand for the food and in turn lead to a decrease in total revenue earned by the food stall owners.

I feel that it is more important to maintain loyalty to regular customers and maintaining their brand name. This is a form of product differentiation and can help to make the demand more price inelastic. The lower price and better quality of the meal can help to attract more customers and increase demand. This can help to maximise total revenue.

However, in cases where the rise in rice prices results in food stalls owners making great losses, food stall owners have not much other choice but to raise the price of the food. In these cases, the food stall owners will have to come up with ways to attract more customers and make the demand for the food the stall is selling more price inelastic.

Sylvia

posted by Ying Zhen @ 10:01 PM