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Food Prices

International and EU Trends

Changes in food prices are primarily a function of market forces operating at international, EU and national levels. An easing of price pressures in 2009 was succeeded by a return to strong world commodity prices in 2010, primarily due to adverse weather conditions in key production regions and an increase in food prices in a number of countries. The FAO Food Price Index[1]  rose for the seventh consecutive month, averaging 231 points in January 2011, up 3.4 percent from December 2010 and the highest (in real and nominal terms) since 1990.

Cereal prices are now back to the high levels experienced in 2007/2008 and sugar prices are extremely high. Meat prices have not risen to the same extent, however feed prices may well impact on these during 2011. The EU HICP for January 2011 does suggest only modest increase in meat products but a larger increase in fruit and vegetables. Strong competition in food retailing coupled with weak consumer demand has exerted downward pressure on food prices in some countries.  Supermarkets appear reluctant to pass prices on to consumers and are instead using various offers to attract customers. 

Food Prices in Ireland

For 2010 as a whole, the price of food and non-alcoholic beverages prices (as measured by the Food Price Index; FPI) decreased by 4.5% on average for the year, while the overall rate of inflation, as measured by the Consumer Price Index (CPI), averaged only a 1.0% decrease during the year.  However the rate of decline in food prices steadily slowed during the year until the December 2010 FPI showed the first increase, 0.1%, since February 2009 (See Figure 6.1).

Household grocery spend has seen a significant reduction during 2010. Consumer sentiment has recovered somewhat in early 2011 but the risk of a return to negative growth still remains for later in 2011[2].

 [1] FAO Food Price Index

 [2] Research by Kantar Worldpanel

Figure6.1 

Figure 6.2 compares the overall level of inflation with its 12 constituent categories (including food and non-alcoholic beverages) for the years 2009 and 2010.

Figure6.2 

Prices for Food Products

Price movements over any given period for individual food products vary by sector and will depend on numerous factors, including volatility in commodity and input costs, tightening of supply and, above all recently, the world economic crisis. The majority of products initially experienced price increases of varying degrees in 2007 and 2008 before showing exclusively deflationary price movements in 2009 and 2010.

In 2010 price decreases continued across the range of products, being particularly evident in poultry (-13.2%) pork (-6.7%) and milk products (-6.5%) and fresh fruit (-5.0%). The trends for a selection of products are outlined in Figure 6.3 and further produce is listed in Table 12.8 in the statistical annex.

Figure6.3 

EU Food Price Trends and Comparisons

The Harmonised Index of Consumer Prices (HICP) measures the increase in prices on a monthly basis for the EU-27 Member States and is the most reliable comparison of inflation across the EU. It excludes interest on mortgage repayments and certain forms of tax and insurance. Ireland's annual percentage change of HICP inflation in the year to December 2010 was -0.2% compared to -2.6% to December 2009. Figure 6.4 demonstrates the wide divergence in food and overall price developments in the EU-27 for 2010.

Figure6.4