Swift Headline
Latest News and Updates

Global shoppers feel the pinch of rising food prices

At the I Fresh Market in New York’s Sunset Park, a working-class neighbourhood in Brooklyn, Lily Leong picked up a bundle of spring onions, inspected the label, and put them down again.

“These used to be three for $1,” she said, dropping them back into the produce bin where a sign priced them at $1.99. As for beef: “Oh my God,” she exclaimed, “everything is very expensive”.

Leong’s experience increasingly chimes with that of food shoppers around the world — be it Brazil, France, Russia or along Brooklyn’s Eighth Avenue, where crates and baskets of fresh produce stand in front of the rows of stores.

The reason for the dismay is simple: global food prices have surged because of bad weather, such as droughts in North and South America and heavy rain in Europe, and the supply chain problems that came with the easing of coronavirus restrictions.

The FAO food price index rose at an astonishing annual rate of 31 per cent in October. The IMF’s food and beverages commodity index rose at a similar rate. In real terms, after taking into account inflation, global food commodity prices are now higher than their 2008 and 2011 peaks, just before the Arab spring protests that were partly caused by soaring food costs.

Poland’s agriculture minister was one of those to warn recently of a “food prices crisis”. In the worst-case scenario, rising food costs combined with surging energy prices have the potential to imperil the livelihoods of millions of people around the globe — just as the world emerges from the worst of the pandemic.

Even so, the data show that a 1970s style food price crisis that coincided with famine in some poorer countries is not here, yet. Although in some countries, especially in the emerging world, food prices are rising at double-digit rates, in others — notably in Europe and parts of Asia — the amount that shoppers pay at the till has actually been falling.

At the Franprix supermarket in the Belleville neighbourhood of Paris, for example, shop assistant Ayyoub Ben Belkacem has got used to customers “complaining about food becoming unaffordable”. Yet while products such as tomatoes and bananas were “really expensive now”, the price of pasta and pastries had fallen recently, he explained.

The main reason why consumers’ grocery bills are not rising at the same rate as indices suggest is that the latter captures the wholesale price paid to producers, and this only accounts for a fraction of what shoppers actually pay at the till.

Out of every dollar that US consumers pay for groceries, for example, just 15 cents go on food. The rest goes on others costs such as processing, marketing and distribution, said Marion Jansen, director of the Trade and Agriculture Directorate at the OECD.

Consumer price food inflation is running at 4.5 per cent across the OECD’s 30 mostly rich nations. That is three times what it was as recently as May. Even so, this increase is far “less acute” than for wholesale commodities prices so far, Jansen said.

Line chart of Annual % change on consumer price index showing OECD food inflation broadly tracks overall consumer price growth

In fact, in developed economies including France and Japan, the prices that shoppers pay rose by only about one per cent in September, while consumer food prices actually fell in China, Switzerland and Belgium.

This provides no succour to shoppers in other emerging countries, such as Argentina, Brazil, Colombia, Russia or Turkey. There, food price inflation, which is running at more than 10 per cent, has been augmented by the fact their currencies have slid against the dollar.

“Since commodities are typically traded and paid for in US dollars, this increases domestic food inflation,” said Christian Bogmans, an economist at the IMF.

In Russia, soaring food costs have become a big political issue, with sliding real incomes sending approval ratings for the ruling United Russia party to a record low. In Brazil, the food and beverages consumer price index rose by an annual rate of 12 per cent in September.

Bar chart of Annual % change on the CPI food and non-alcoholic beverage index showing Food CPI inflation varies across countries

Vilma de Souza is just one Brazilian among many who now wonders if she can still afford steaks for her family’s traditional weekend barbecue.

“I’m no longer buying red meat, it’s just too expensive,” said the housemaid from Ubatuba, a seaside town in São Paulo state. Overhearing the conversation, a local butcher chimed in: “many are buying chicken because it’s cheaper. It’s hard for everybody.”

Although food prices rises are lower in the developed world, shoppers are still feeling the pinch, particularly those on the tightest budgets. Food prices are up nearly 2 per cent in the eurozone, rising to more than 4 per cent in the US.

Column chart of Annual % change on consumer price sub- index showing The proportion of countries with food inflation above 2 per cent is rising

Back in Brooklyn, a young couple buying fruit from a small stand on the corner of 8th Ave and 53rd St, are also feeling the effects. “Everything is going up,” said Nancy, as her partner Vincent nods in agreement.

The pair say they are “OK” and can handle the price increases for now. But for how long developed world consumers will be able to buy the groceries they are used to might be moot if input costs such as energy continue to soar.

Fiona Boal, head of commodities at S&P Dow Jones Indices, said that eventually “inflation worries will bleed from energy to other sectors of the economy, including the food industry”.

Read original article here

Denial of responsibility! Swiftheadline is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – admin@swiftheadline.com. The content will be deleted within 24 hours.

Facebook Notice for EU! You need to login to view and post FB Comments!

Leave a comment