Coronavirus Complicates Sourcing Ahead of Ramadan, High Prices for Food
The holy month of Ramadan, taking place from the end of April until the end of May this 2020, has significantly increased demand for some staples: dates, cooking oil, wheat, garlic, and sugar. The holiday is observed by the majority of the world’s 1.6 billion Muslims and is celebrated all over the world.
Food plays an important role during this month, leading to a high demand for Ramadan staples. As many suppliers also anticipate and count on high sales for Ramadan, domestic prices of products within the Middle East usually remain relatively stable. However, prices for importers outside these countries, such as Southeast Asia and Europe, usually see a significant spike in prices. This year, prices of staple products are generally very high due to shortages and uncertainties surrounding the coronavirus and subsequent border closures.
Strong Increase in Food Imports Before Ramadan
During Ramadan, people only eat 2 meals, one before sunrise and one after, and fast in between. The meal before sunrise, suhoor, is often a simple meal to build strength, whereas the evening meal, iftar, is a much more elaborate meal that includes soups, salads, lamb dishes, desserts, and plenty of dates. Ramadan ends with Eid al-Fitr, a holiday which breaks the fast and on which typically a lot of dishes are consumed and large quantities of sweets and chocolates are bought.
Countries with large Muslim populations, such as the Gulf region, Northern Africa, the Middle East, and some countries in Southeast Asia and Europe, see an uptick in food imports in the months leading up to Ramadan. Although fasting is an important part of the holy month, food during suhoor and iftar is equally important. Consumption of bread, chicken, dried fruits, lamb, and nuts increases by as much as 60% compared to other months of the year.
Most products that are eaten especially during Ramadan are sourced well in advance, around 3 months before, as they have a long shelf-life. The export volume of dates, spices, and nuts starts increasing around this time, meaning that prices for these products also increase. Although many producers within the MENA region do have a higher supply available for Ramadan, most producers outside of this region, such as Thai sugar suppliers or exporters of Guatemalan cardamom, do not and thus experience strong price fluctuations.
Which Products Are Mostly Demanded During Ramadan?
Dates
Typical products that are eaten especially during Ramadan and thus see an upswing in demand are dates, meats such as lamb and poultry, nuts, sugar, dairy, cooking oil, and grains. Dates are typically eaten to break the day’s fast at iftar and are thus highly consumed during the month of Ramadan. The most popular are dates from Saudi Arabia, the expensive Ajwa variety, and Medjool dates, which are grown all over the Middle East.
Dates are available all-year-round in this region, but demand strongly peaks in the months leading up to Ramadan, causing upward price fluctuations of up to 50%. These price fluctuations mostly affect importers in Europe and Southeast Asia. As most MENA suppliers count on high demand for Ramadan, they ensure that they increase their production to fulfill domestic demand, keeping the prices low for domestic buyers. Most date exporters sell around 30% of their total yearly sales during this period, making it the most lucrative month of the year.
Countries in Southeast Asia with large Muslim populations, such as Indonesia and Malaysia, have to import a lot of dates as they do not have any sizeable local production. In 2018, Indonesia imported USD 33.8 million worth of dates during the two months leading up to Ramadan, more than half of its total yearly imports of USD 63.8 million. The country expects that demand for dates will increase by 85%-90% during the month of Ramadan, with 2-3 metric tons consumed per day.
Most of the dates are sourced from Egypt, Tunisia, and Saudi Arabia. The high demand means that prices are significantly higher than average, but Indonesian importers do not have a lot of choices when it comes to sourcing this product. Luckily, consumers are willing to pay extra during this month.
Meats
Lamb and mutton are also staples during iftar and are thus highly demanded during Ramadan. Australia and New Zealand together supply almost 70% of the world’s lamb and most lamb is either sourced domestically or from these two countries as a result. Prices for lamb can increase significantly, up to 25% in Indonesia.
Sugar, Nuts, Oils
Demand and prices for cashews, peanuts, and sugar also increase. These products are mainly sourced from India, Brazil, and Southeast Asia. Sugar has already been suffering from high prices due to a supply deficit. Spices, such as cardamom and nutmeg, and cooking oils also see an increase in demand and price during the months leading up to Ramadan. As these products can be bought a few months in advance, the price usually starts to rise 2-3 months before Ramadan starts.
What does this mean for buyers in 2020?
Buyers in countries with large Muslim populations often do not have a choice in sourcing Ramadan staples for higher prices, especially when it comes to products with a short shelf-life. Exporters know this and often charge price premiums in the months leading up to Ramadan, making buyers pay even more than necessary. For the 2020 Ramadan, most contracts will have been agreed upon now, meaning that, on a normal year, prices for cardamom, cashews, dates, and other products should start decreasing soon.
However, this year has not been a normal year. Prices for certain products, such as onions, sugar, peanuts, and corn oil, have been higher than average due to shortages in the market. This caused high prices already before Ramadan demand started to pick up. Prices have been further increasing due to the influence of the coronavirus, COVID-19, on the market. Garlic prices, ginger prices, and sugar prices - to name a few - have shot up significantly over the last two months.
What further complicates things for importers, is that there is a lot of uncertainty regarding import and export restrictions as well. With many countries going on lockdown in Europe and the Iranian border closure, many importers worry whether their ordered products are able to arrive at their destination at all. Especially, the border closure of Iran, the largest exporter of dates and other major staples for Ramadan, has especially caused worries for many Southeast Asian buyers.
With coronavirus cases around the globe increasing daily, it is highly likely that market disruptions will persist. The effects on available food supply for Ramadan will be felt, both on prices as well as on the physical supply. Products that are currently in short supply are dates and garlic, but other products are joining this list as more countries close their borders.
With high prices and widespread border closures, buyers will have to look for alternative sources, such as alternative import origins or domestic farmers, for many staple products.