It looks like consumers will soon have to dig deeper into our pockets for their daily groceries. Basic ingredients such as wheat, corn and soya have become much more expensive and that will lead to price increases for a lot of other products.
Highest prices since 2012
According to Bloomberg, the prices of major agricultural crops have risen to the highest level in almost 9 years. Food prices in supermarkets are expected to follow this trend, as these crops are essential for many other products such as bread, meat, pizza and even soft drinks.
The price increases are mainly due to the huge demand from China. Over the past year, the price of corn has doubled, while soybeans and wheat have risen 80% and 30% respectively. Moreover, there are currently few indications that a turnaround is imminent, especially as harvests in Brazil and the United States are threatened by a series of adverse weather conditions.
Global threat
Rising commodity prices are having a major impact on households and businesses and are threatening the recovery of the global economy, which has been hit hard by the corona pandemic. Moreover, food inflation will primarily hit families who are already struggling because of the crisis. According to Abdolreza Abbassian, an economist at the UN Food and Agriculture Organisation, it is very likely that prices will rise further. “There are hard times ahead,” he said.
The fact that food is becoming more expensive is shown, among other things, by the sharp rise in the price of tortillas in Mexico. In Brazil, beef became more expensive and the price of bacon has started to climb in the United States. Meanwhile, several governments are intervening. Russia, one of the world’s largest grain exporters, has frozen the retail prices of certain foods and taken measures to limit shipments. Bolivia has temporarily banned beef exports to secure domestic supplies and curb prices.
“Price rises inevitable”
According to OC&C Strategy Consultants, in Europe there is usually a six-month period between rising commodity prices and higher shelf prices. Retailers and manufacturers often use various techniques to soften the blow to consumers, such as phasing out promotions or reducing package sizes while keeping prices unchanged. “Once the prices of key commodities such as wheat, sugar and bulk oil start to rise for a sustained period, manufacturers have little choice but to pass on those higher costs,” said Will Hayllar, managing partner at OC&C in London.
