Demand and poor harvest drives rapid food price rise

POOR global harvests, turning land to biofuel production and rising demand from India and China are seen as key catalysts for the fastest rise in food prices since records began in 1992.

Figures from the Office for National Statistics this week revealed wholesale prices have risen 7.4 per cent in 12 months, while retail food prices have risen by just 5.4 per cent.

Experts say the retail price of bread and milk, up 7.5 and 15 per cent respectively, has started to filter down to dairy and cereal farmers, but livestock farmers remain shortchanged.

According to figures collated by the Meat Trades Journal, average retail meat prices have risen rapidly over the past five years, with English beef up 14.9 per cent and English lamb up 10.3 per cent.

But the gap between what the farmer receives and what consumer pays is widening.

“Far from livestock farmers benefiting, the pay gap has actually been widening in recent months, so that the farmer’s share of the retail price of beef has fallen from 48 per cent to 46 per cent, and of lamb from 42 per cent to 35 per cent. This is not a sustainable situation,” said an NFU spokesman. “Supermarkets should be using their economies of scale and market power to increase prices to producers and hold prices to consumers, rather than the other way around.”

However, British Retail Consortium director general Kevin Hawkins said: “There is no food price explosion. The rate of food inflation is actually slowing, while overall shop-price inflation is stable.

“With average operating margins of only 4 per cent and their own costs shooting up, there is only so much supermarkets can do, but the figures actually show the strength of competition in the grocery market, protecting customers from what would otherwise be severe prices rises.”

The figures show the average consumer grocery basket to have risen by 12 per cent over the year, but the agriculture industry contends that food is still relatively inexpensive when put in perspective.

“In the last 20 years, the proportion of income spent by the average consumer on food has fallen by 20 per cent, to no more than 10 per cent.  Of that expenditure, only a quarter finds its way back to the farmer or grower,” said an NFU spokesman.