Ministry of Trade & Industry Security of food supplies
In the future, the supply of food will be uncertain. During glut periods, the prices will drop. During shortages, the prices will increase sharply.

Here are the possible ways to deal with the situation:

a) Let the market handle it. If the food prices are too high, the people can look for alternative food.

b) Stockpile the food during glut periods and introduce them during shortages.

c) Introduce govt control to speculating on the food shortage to raise the prices and make excessive profit.

Most countries adopt the approach to leave it to the market. It seemed to work well.

Some countries had adopted stockpiles of food and essential commodities, but most of these measures have been abandoned.

Govt controls did not seem to work in the past. It created a black market.

The challenges in the future, and the imminent shortage in food supply due to increase in world population and climate change require a re-think.

There is an additional risk that we should be aware of. If there is a global shortage, the supplying countries will introduce export controls to protect their people from the shortages. The people in the importing countries, such as Singapore, will have to bear the blunt of these restrictions.

The difficulties in the past of implementing stockpiles and controls may be addressed with modern technology.

If food can be released from govt stockpiles, it will help to moderate the prices. it will increase the supply and the prices will not go too high due to speculation.

It is important that the govt should handle the stockpile as a price moderating measure. The KPI should not be to reduce cost or make profit. The govt should not be a big speculator with the goal to make profit.

If the govt release food from its stockpile and help to moderate prices, will the speculator buy the food at "cheap prices" and export them. This requires govt control over the exports.

The stockpile approach makes it feasible for the govt to have long term agreements with producers in neighboring country to provide food supplies at agreed prices. In normal glut years, these agreed prices are higher than the market. The difference can be borne by the govt, similar to the cost of defence.

It is also possible to allow the local prices to be higher than the world prices, to reduce the burden on the govt. The tradeoff is that the prices will be moderated during shortages.

We are already used to prices of food and many essential items in our cost of living to be higher than other countries, due to our higher cost in Singapore. The higher price to ensure security of food supply will be part of the cost of living in Singapore.

We can look for other ways to reduce the cost of food, but it is better to have measures to provide stability in the food prices, through stockpiles and controls.

Tan Kin Lian

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