I believe everyone here has seen the increase in food prices since the lockdown started. One unit of vegetables increased from 3000 riels to 10000 riels or more. I will explain why this happens using the simple economic model of demand and supply. As the supply of food falls and demand for it rises, the prices for food increases.
Why did the supply of food decrease?
With lockdown restrictions in place, there are some barriers on the roads. Since people can no longer travel freely, the distribution of food will be faced with great obstacles. For example, only authorized individuals are allowed to enter and sell food in the Red Zones in Phnom Penh. This concept applies throughout the whole country. Stricter border control also slows down food imports due to more stringent measures placed at our borders.
However, it is important to understand that the government is making great efforts to ensure plenty of food supply. Food imports are still authorized at the border, and farmers can still bring in produce to sell in the city.
Why did the demand for food rise?
Even before the official announcement of lockdown, there was mass panic buying. Panic buying significantly increases the demand for food. Reasons for people to panic buy may be due to the fear of having no food; as they would not be able to leave home. It is also noteworthy that lockdown might be perceived as social instability to some. This may bring flashbacks of when the Khmer Rouge Regime kicked in. It is only right for them to prepare for the worst. For more on panic buying, you may read our previous post, link below.
So what are the impacts of food price hikes?
1. Unnecessary inflation. Higher food prices make it hard for people with low income to obtain food. Combined with the fact that many people are either retrenched or put on hold with no income, they would have to rely on (sometimes) limited savings. This is also a major concern for people who live paycheck to paycheck. They would not have enough money to get enough food. This makes it very hard for them to survive lockdown.
2. Opportunistic and unethical businesses. When food prices rise by a lot in such a short time, it is hard for buyers to keep track of the proper market prices. Added with panic buying, unethical sellers may raise the price so high knowing that buyers are desperate. This in turn causes the food price to increase even further.
3. Social instability. Food price hikes also signal a bad omen to some, despite it not being true. It will inject pressure and stress into people leading to erratic behaviour. This is hard for the government to intervene and control the situation, especially when they are already stretched dealing with Covid-19 infections.
As you can see, food price increasing is very much interlinked with many things in our society. You can say that this problem is ignited by our irrational thinking. If only everyone can stay calm and rational in such times, we would not have to face such a bother. However, we all know that this is not possible. Let’s learn from this experience and prepare ourselves if such an event is to take place again.