Follow our live coverage here.<\/b><\/span><\/a><\/p>\n SINGAPORE – For soya sauce maker Thomas Pek, the fallout from the Middle East energy crisis<\/span><\/a> has hit local manufacturers here in a far more painful way than recent crises, including the Covid-19 pandemic. <\/p>\n Not only have the costs of his soya sauce bottles and bottle caps skyrocketed since oil supply disruptions wrought havoc on prices of polyethylene terephthalate (PET)\u00a0resin \u2013 a key material for plastic bottles that is made from crude oil \u2013 but his production costs and transportation costs have also surged on higher diesel prices.<\/span><\/a> <\/p>\n \u201cDuring the pandemic, our costs did not increase so much. Back then, we exported less to maintain food security here. But this crisis is worse than the pandemic. All our costs from packaging to transportation, production, delivery, freight and shipping insurance have increased,\u201d said Mr Pek, managing director of Tai Hua\u00a0Food\u00a0Industries. <\/p>\n Even though industry diesel, which Tai Hua buys directly from oil refineries in Singapore, has jumped from $1.20 a litre in late February to $3 a litre on April 10, Mr Pek has not raised his soya sauce prices yet. <\/p>\n But he may have to raise prices by 10 per cent to 15 per cent from May, as the PET resin shortage and high prices of diesel \u2013 which powers Tai Hua\u2019s boilers to steam soya beans and cook soya sauce \u2013 could persist, given that the damage to vital energy infrastructure in the Middle East will take years to fix.<\/p>\n Diesel powers road freight, agricultural machinery, construction equipment, rail and a large part of industrial activity. Hence, shortages of diesel will raise the costs of freight, food production and industrial output, while shortages of petrochemical feedstock, which are used in the manufacturing of plastics, can lift packaging costs and, in turn, the costs of certain processed food.<\/p>\n \u201cThis is even more severe than the pandemic because the oil shock affects everything. But we have not seen the full impact of the crisis yet,\u201d Mr Raymond Tan, president of Singapore Food Manufacturers\u2019 Association (SFMA) told The Straits Times.<\/p>\n \u201cThere\u2019s no big price increase for food products yet because manufacturers have been absorbing the increased costs, and tapping ingredients and packaging materials secured before the war. But once these stocks are depleted, and new orders of ingredients and packaging materials are made, that\u2019s when the full impact will kick in,\u201d he said.<\/p>\n Mr Pek added: \u201cOur soya sauce bottle costs and cap costs increased 8 per cent in March, and then another 15 per cent in April, but we have been absorbing this. Because we export soya sauce to the Middle East, Holland and Mexico, our freight costs and shipping insurance will also be increasing.\u201d <\/p>\n Meanwhile, fertiliser production costs have skyrocketed because nitrogen fertilisers are natural gas-intensive products.<\/p>\n With the Middle East accounting for about 30 per cent of global fertiliser trade, shipment disruptions from the region have resulted in global prices of urea, a form of\u00a0nitrogen\u00a0fertiliser that farmers normally use, rising more than 35 per cent over the past month.<\/p>\n Compounding the shortages, trade restrictions by China and Russia are tightening global fertiliser supply,<\/span><\/a> particularly for import-dependent countries in Asia and Australia, according to ANZ Research.<\/p>\n Besides tighter availability, higher fertiliser and energy prices have lifted production costs, which could lead to a reduced planting area along with lower fertiliser application, which could result in less bountiful harvests, increasing the risk for food inflation, the research house said.<\/p>\n Mr Pek checking the condition of the soya bean paste in his factory’s natural fermentation drying yard.<\/p>\n PHOTO: COURTESY OF TAI HUA FOOD INDUSTRIES<\/p>\n<\/figcaption><\/figure>\n If these higher costs and shortages persist, farmers may use less fertiliser or plant fewer crops, which would in turn weigh on yields and food availability, ANZ said.<\/p>\n Due to challenges exporting fertilisers from the Middle East and China, Singapore-based global agri-commodity firm\u00a0Agrocorp\u00a0International has been focusing its efforts on alternative sources in Pakistan, South Korea, Morocco and Vietnam, Mr Vishal\u00a0Vijay, its chief executive, said.<\/p>\n But the impact of higher fertiliser costs and fertiliser shortages on food prices remains uncertain, he said.<\/p>\n Crops such as wheat and rice use more\u00a0fertiliser\u00a0than other, more nutrient-efficient crops like soya beans and pulses such as chickpeas and lentils. So, potentially, farmers will plant more soya beans and pulses, which could moderate food price increases, he said.<\/p>\n Mr Vishal believes the impact of higher freight costs on food prices will be marginal as \u201cthe imported price of agri-commodities is only a fraction of the final retail price. Other factors including manufacturing costs, distribution costs and retail margins play a role in determining what consumers pay.\u201d<\/p>\n Here in Singapore, some local vegetable, egg and fish farms have been absorbing the higher costs of fertiliser, feedstock and diesel, but they say they will pass on the costs to consumers if energy and fertiliser prices and other costs remain elevated.<\/p>\n Local egg farm Chew\u2019s Agriculture does not expect its feed supply to be disrupted, but feed costs, which are the main costs of running a poultry farm, have risen significantly and could continue to add to its operation costs as long as the war continues.<\/p>\n \u201cOur feed is from Malaysia but the raw ingredients are sourced globally and very much impacted by world events… We have also seen an increase in price of consumables such as packaging material. The steep increase in diesel prices has increased our distribution costs tremendously,\u201d general manager Chew Zi Xuan said.<\/p>\n \u201cWe are absorbing these cost increases for now, but should the war continue, we will have to look at increasing our egg prices,\u201d he said.<\/p>\n In addition to higher packaging costs,\u00a0many food ingredients, especially agriculture-based products such as grains, flour and starches, are likely to see price increases due to\u00a0higher fertiliser costs and shortages, said SFMA\u2019s Mr Tan, who is also managing director of noodle manufacturer\u00a0Tan\u00a0Seng Kee Foods.<\/p>\n Given the jump in logistics and shipping costs,\u00a0Mr Tan said manufacturers are considering ways to save on costs by consolidating deliveries and sharing transportation costs.<\/p>\n \u201cWe are also looking at producing certain food items on certain days or at certain times to save on fuel,\u201d he added.<\/p>\n<\/picture><\/div>