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Causes of Food Inflation in Turkey - Nur Durmaz

Food inflation, which is one of the problems brought about by the economic decline in our country, unfortunately, affects many people's lives negatively. In these times, when we feel the effect of the Russia-Ukraine War, food prices increase considerably. Considering the import of products such as wheat, barley, and sunflower, this war poses a risk for our country's agricultural sector. According to TURKSTAT, 86% of the wheat import was made from Russia. Again, according to TURKSTAT, the Consumer Price Index (CPI), excluding unprocessed food products, alcoholic beverages, tobacco, and gold, in March 2022, was 4.24% compared to February, 16.38% reached in December 2021, and according to December 2020. An increase of 51.34% was observed. The only reason for these increases is not only the Russia-Ukraine war.

In March 2022, the Domestic producer price index (D-PPI) increased too much. The domestic producer price index is an index that measures the price changes in the domestic trade of products in consumption, intermediate and capital goods, and the energy sector. Domestic production costs increased by 9.19% compared to February, increased by 29.31% compared to December of 2021, and increased by 114.97% compared to December of 2021. Although these numbers are quite high, the annual rate of change in food products Yi -PPI is 92.39%. In other words, the production cost of a fruit, which is assumed to be produced for 1 lira in 2021, has increased to 2 Turkish Lira (TRY) in 2022. At this point, it is quite natural to buy a product that was bought for 5 TRY until it came to the market for 10 TRY today. In terms of price increases, potatoes are at the top of the list with an average annual price increase of 206.8 percent, followed by cucumbers with 193.2 percent. Other food products at the top of the list are eggplant, zucchini, and dill.

Agriculture- GFE (Agricultural Input Price Index) has also been seen this year. The agricultural input price index ( Agriculture -GFE ) is an indicator that monitors the variability of the inputs purchased by agricultural producers for production and investment purposes as a cost element. In February 2022, there was an increase of 16.69% compared to the previous month, 28.50% compared to December of the previous year, 80.99% compared to the same month of the previous year, and 36.85% to the twelve-month averages.

In the main groups, the index of goods and services that contribute to investment in agriculture increased by 9.60% compared to the previous month and by 17.69% compared to the previous year. Compared to 2020, the index of goods and services contributing to agricultural investment increased by 47.24%, and the index of goods and services used in agriculture increased by 86.59% in total. The subgroups with low annual increases were veterinary expenditures with 23.88% and materials with 27.91%, respectively. On the other hand, the sub-groups with the highest annual increase were 23.88% veterinary expenditures and 27.91% materials with the lowest annual increase, while fertilizer and soil developers with 138.11% and 121.77%, respectively. Energy and oils were the subgroups with the highest annual increase. The price increase in these products and services directly affects the PPI, which in turn affects the pockets of citizens with increasing infections. With the increase in production costs, while there is a decrease in the product, the unemployment rate may increase simultaneously. In this regard, Turkey needs to apply different policies to increase its production.

YD-PPI (Non-Domestic Producer Price Index) is the price index that measures the changes in the producer prices of the products produced in a certain period and subject to sale abroad. In February 2022, the YD-PPI increased by 2.35% compared to the previous month, by 5.68% compared to the previous year, and by 106.13% compared to the same month of the previous year, breaking a new record. This increase had a significant impact on the food sector and took its place in the data of TUIK with a rate of 105.51%. PPI is produced separately for the industrial sector in the country and abroad. This is done according to the Short Term Business Statistics Methodology of the European Union. The Overseas Price Index has been developed to provide a more comprehensive Producer Price Index for policymakers and individuals who want to gather information and provide adequate statistics that are fully compatible and comparable with European Union standards. However, since the industrial sector is intertwined with the food sector at some point, they affect each other's price indices. At the same time, the effects of speculative activities in the first quarter of 2019 and the last quarter of 2020 came to the fore in public, and the government took some measures to eliminate them. This and similar speculative activities increased food prices and caused losses for those who stockpiled to make extra profits.

D-PPI, YD-PPI, and Agri-PPI are not the only causes of food inflation. To this can be added 2020: COVID-19 Pandemic. In 2020, the COVID-19 epidemic caused an increase in food prices by 3.3%. There is a direct relationship between them, as the increase in Dollar and Euro currencies increases FD and D-PPI. To prevent these, Turkey needs to pay attention to the policies of the countries it exports and imports to and take action at the local and international levels to prevent the increasing price increase.