Why is the cost of food going up?

Why is the cost of food going up?

Shopping today is 13.8% more expensive than a year agoas published today by the National Institute of Statistics once the CPI figures for August have been confirmed. It is increasingly difficult to fill the fridge and the pantry and also to explain why it is and until when it will continue to be so. The inflation rate for food and non-alcoholic beverages was the highest since January 1994 and rose another 0.5% over the previous month, July, after registering notable increases in milk, cheese, eggs, meat, bread or cereals, among others.

Behind these rises are the increase in production costs (electricity, water, cereals and diesel), the shortage of some raw materials as a result of the weather, especially the drought, and international imbalances in the markets, due to the war in Ukraine. Antonio Khalaf, commercial director of Retail at the IRI consultancy, stresses to Efe that it is impossible to calculate how long this rise can last linked to the cost of energy and the scarcity of raw materials, fundamentally due to the war.

“As long as energy costs continue to rise, companies are going to pass it on,” he says, so there are alternatives to act to lower this cost or play with tax rates. The agri-food sector is very broad and each subsector, including the most inflationary ones, share this situation, but in turn have their own casuistry.

Milk registers the highest rise

In annual terms, milk is the most significant upturn, 25.6%, a percentage that -however- is less than the 38% increase in the price paid for milk at origin to the farmer the previous month, in July, explains to Efe the general director of the National Federation of Dairy Industries (Fenil), Luis Calabozo. “The cost of the basic raw material that is milk to produce dairy foods has risen more and that, with some delay, is unsustainable if it is not transferred to the consumer,” Calabozo highlighted.

Plan

With the rise in production costs that began in 2021, primary production began to suffer and has been slow to cover costs, so that in many cases farmers have had to kill older cows because the meat market was more profitable and this lack of production – also registered worldwide – has raised prices even more.

The oil, affected by the distribution

The manager of the Olive Oil Interprofessional, Teresa Pérez, explains that olive oil has become more expensive by 13.2% in the last twelve months, due to the prices of packaging and fuel in distribution. In any case, this increase in oil was foreseeable after the “abnormally low” prices of two campaigns ago, according to Pérez. It has risen by 13.2%, and the effect of the rise in production costs on raw materials has not yet been appreciated, as is expected from the marketing of the oil produced in the next campaign, from October.

Eggs suffer from increased feed

The continued increases in raw materials for animal feed, of up to 78%, the higher cost of energy, transport, packaging and, in general, of all the inputs involved in the production and marketing of eggs have caused the increase in the price of eggs, point out from the employers’ association Inprovo. In addition, the sector is immersed in a process of change to cage-free systems, mainly from a conditioned cage to a floor system, which implies an increase of between 18 and 20% in production costs.

Additionally, there has been a drop in egg imports in the EU (Ukraine represented 50% of the total), and an increase in exports, which together with the effects of avian flu, which has affected many laying hens , has led to a reduction in supply and therefore tensions in the market.

farmers protest

Cereals affected by the war in Ukraine

In reaction to the rise in the CPI in “cereals and derivatives” (+21.7%), the general secretary of the employers’ association of grain and oilseed merchants Accoe, José Manuel Álvarez, has justified this rise with the rise in raw materials , due to factors such as the reduction in supply due to the weather, the war in Ukraine or the grain deficit in Spain, a net importer of wheat and barley. The head of the Accoe employer’s association has underlined the “uncertainty” about the evolution of the market, although international estimates predict a drop in harvests.

Chicken, the meat that has risen the most

Poultry has been the meat that has become more expensive in annual terms (+17.6%), pushed by the high costs of raw materials and energy that producers bear, explains to Efe the general secretary of the Spanish Interprofessional Association of Poultry meat (Avianza), Jordi Montfort. This increase in the retail price “is insufficient to cover production costs,” regrets the representative of this interprofessional organization. In the future, he foresees a difficult winter in which the problem with gas and electricity will continue and warns of the risk that “there will be a shortage of product if costs continue not to be covered.”