Turkey must fix agriculture sector to bring down food inflation - business lobby

ISTANBUL, Feb 20 (Reuters) - Turkish government measures will bring food inflation down temporarily but prices will rise again if structural issues in the agriculture sector are not solved, Turkey’s main business lobby TUSIAD said on Wednesday.

Food prices surged 31 percent year-on-year in January and have been a key inflation driver in recent months.

Ankara has accused retailers of jacking up food prices, calling it “food terror”, and set up its own markets to sell cheap vegetables directly to shoppers.

Traders have said the reasons for food price inflation are storms in southern Turkey’s farming region, as well as rising costs of labour and transport.

Tuncay Ozilhan, the head of TUSIAD’s advisory council, said government measures to tackle food price inflation would only provide temporary relief and that a 200-percent rise in food prices between 2007 and 2018 pointed towards structural issues.

“The inevitable outcome of a structure where ... incentives for land are not used effectively and agricultural input prices climb rapidly is agricultural production decreasing and the working-age population leaving villages,” he said.

“We need to increase agricultural production so as not to become dependent on imports.”

Cooperative agriculture needs to increase, food waste in the supply chain needs to be reduced and incentives need to be improved, Ozilhan said.

Turkey’s annual inflation has partially eased since peaking in October but still stood above 20 percent in January. It was stoked by a sharp decline in the value of the lira last year.

That sell-off sparked by concerns over the central bank’s ability to respond to rising inflation while facing calls from President Tayyip Erdogan to lower borrowing costs. (Reporting by Can Sezer Writing by Ali Kucukgocmen Editing by Daren Butler and Raissa Kasolowsky)