Euler Hermes: UAE food sector, rising prices and increased demand

DUBAI, UAE, February 25, 2017:  Euler Hermes, the world’s leading provider of trade-related credit insurance solutions, expects food prices to rise in the United Arab Emirates (UAE) in 2017. Global food prices stopped plunging in 2016, with a contained -1.5 percent drawback of the FAO Food Index. This was the lowest decrease in five consecutive years.

Jules Kappeler, Chief Executive Officer (CEO) Euler Hermes Middle East, Dubai, commented: “The UAE imports more than 80 percent of its food needs. Therefore, the Gulf Arab country will face spillover effects from a rise in agricultural food prices in 2017, as our analysts noted a sharp improvement of Sugar prices (+34 percent) and vegetal oils (+11 percent) last year.” 

In relation to UAE’s reliance on food imports, Euler Hermes expects spending on food & beverages to grow at a rate of 8 percent until 2018, which reinforces the strong growth trends. 

In 2017, food consumption in the UAE is estimated to represent a 21 percent share within the GCC market, the second highest in the region behind Saudi Arabia (59 percent) according to statistics (see chart 1). Being largely dependent on food imports, the six GCC nations are most  exposed to the fluctuations in international food prices. 

Euler Hermes expects that globally, agricultural commodities should report a slight pick-up after bottoming out in 2016. Jules Kappeler added: “Given this global environment, coupled with a 20 percent higher price of oil in 2017 (compared to the average price of oil last year), and an increasing demand for food due to organic population growth & international tourism, agrifood import firms face slightly higher food prices. This is also linked to the fact that the agrifood sector ranks among the three most regulated sectors for trade.”