Food again significantly more expensive: highest price increase since 1976

If you look closely at the receipts, food prices have risen sharply in recent months. Take free-range eggs: a box of ten pieces went from 1.66 to 1.83 to 1.91 euros in three months, wrote an observant Twitterer

On average, groceries were more than 11 percent more expensive last month than a year ago, Dutch Statistics calculated on Wednesday. This is a higher increase than the general price increase for goods and services: it was 8.6 percent.

How is it possible? A period of high inflation, such as now, is often accompanied by higher food prices – but that is not the whole story. Food prices also have a life of their own, says Elwin de Groot, an economist at Rabobank. “Like energy prices, they have a clear relationship to what is happening in the commodity market.”

For example, weather conditions (and climate change) have a major impact on harvests and thus on prices. Geopolitical developments also affect prices – like the war in Ukraine. Russia is blocking grain exports, which means there is now less grain on the market.

Inflation occurs when supply and demand are very out of balance. For food, it is often supply disruptions that lead to large price increases. “These events are, so to speak, separate from the inflation that economists always talk about,” says De Groot. “It is the result of economic expenditure and is mainly related to the economy.”

For other less perishable goods and services, price increases are more demand-driven, says De Groot. “As a result, prices are somewhat more stable.”

Unique rise

It is unusual that food prices are now rising so fast. The last time this happened was in 1976. Between March 1975 and 1976, food became 10.4 percent more expensive. A considerable increase, but compared to other countries, the Netherlands was ‘not so crazy’, it was said at the time. NRC Handelsblad† Argentina, for example, achieved a price increase of 628 percent and the United Kingdom of 22 percent. There was also high inflation at the time as a result of the oil crisis. And on top of that came a dry summer.

Another high point in the rise in food prices can be seen in 2001, when the foot-and-mouth disease crisis unfolded in Europe. Due to this livestock disease (foot-and-mouth disease), 300,000 animals were slaughtered in the Netherlands. This caused the price of food to rise. Shortly afterwards, food prices actually fell: between August 2003 and 2004 by more than 5 per cent. It was due to the price war between the supermarkets.

From 2017, prices rose again due to African swine fever in China and other parts of Asia, killing millions of pigs and other boars.

Meat and fish

Most price increases: meat and fish. A piece of meat cost no less than 16 percent more in June than a year earlier. Fish 10 pct. It cuts in, because the average consumer spends five times as much on meat as on fish.

An average consumer spends about 11 percent of his spending on food. On average, 25 per cent of this goes to meat and fish, 23 per cent to fruit and vegetables, 21 per cent to cereals and 14 per cent to dairy products. They have also become significantly more expensive: 14.5 per cent. Butter rose most in price.

This is not only due to supply-side disruptions; inflation actually plays a role. “Behind the food on your plate, there is also a piece of work and services,” says economist De Groot. “That part also determines the price. And the price of energy and raw materials: tractors run on diesel, manure is made on the basis of gas. “

The World Bank said in late April that it expected food prices to remain high until at least 2024 as a result of the war in Ukraine. The bank expects sharp price increases of between 40 and 70 percent on wheat, palm oil, fertilizers and energy this year.

Higher inflationary pressures

Prices at food producers were almost 23 percent higher in May than the year before. Consumer prices often follow producer prices, but according to Dutch Statistics, the long production chain and distribution chain have a delaying effect. And trading and shipping margins have a dampening effect.

The rise in food prices in the Netherlands in May was around the European average. In Belgium the price increase was slightly lower, in Germany somewhat higher. It is primarily the Eastern European countries where food prices rose more sharply. “We are seeing somewhat higher inflationary pressures in the Eastern European countries,” says De Groot. “It has to do with their good economic results in recent years: there is more talk of overheating.”

In general, he says, global commodity prices are actually falling slightly. “It may have to do with the cooling global economy.”

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