Food is already suffering from the rise in energy prices

Is Christmas will serve as an excuse for price hikes. Like every year and more. The rise of energy costs, both electricity and oil, they have fired sale prices of food around 8% compared to last year, according to a follow-up carried out by the Organization of Consumers and Users (OCU). To the geometric increments that the typical Christmas products Many others are added, as a consequence of an amalgam of circumstances that justify increases greater than in other years. Elvers, oysters, suckling lamb and sea bream are the leaders of a classification of products that are rising the most. Barnacles, hake or round veal are the ones that fall the most in the follow-up done by the OCU.

For the general director of the supermarkets employers’ association Asedas, Ignacio Garcia Magarzo, “there are objective causes for price increases, mainly due to the rise in energy, electricity and fuel costs, but also due to the rise in raw materials, mainly imported ones such as cereals or animal feed”. In any case, the official position of the distribution sector is that the increases in food prices in the last three months have been below the rise in the general CPI. García Magarzo believes that “the Spanish agri-food chain is solid and very responsible, acting in high competition, so consumers always have the option to compare the offer and prices, and choose the best purchase option.

Iri’s consumption barometer also corroborates a rise in food, but less than that reported by the OCU. Thus, the price of the shopping basket grew 1.8% compared to 2020. Of note is the rise in price of olive oil (+10.5%), cola soft drinks (+ 9.2%) and beers ( +3.7%), while the only decrease is found in canned tuna (-0.2%), according to data from the Iri consumption barometer. The general CPI in advance for November is 5.6% year-on-year, with a rise in food in October of 1.3%, 1.7% year-on-year and 3% in 2021.

Sources in the Condis chain acknowledge that there are “multiple factors” that intervene in price fluctuations but that the great commercial capillarity means that food prices are contained more than those of other products from other sectors. In the commercial strategy of the chains, it is tried that the fluctuations in the costs affect the final prices as little as possible, they recognize in Condis, as a way to avoid loss of customers.

The rise in prices is especially noticeable in fresh foods due to the increase in raw material costs (fertilizers, production costs, higher payments to suppliers). Farmers and ranchers have repeatedly complained this year that their inputs (production costs) have risen on average by more than 30%. But in the distribution chains they also allude to causes derived from the supply-demand relationship of each product. In the case of meat, it is pointed out that in recent months there has been a deficit in the replacement of live animals due to the pandemic, with a delay in the reproduction cycles. The increase in seasonal demand itself, both external (export) and from restaurants, also influences it. In the case of olive oil, for example, prices tend to rise due to a normal cycle of lack of production and limitations of the last harvest.

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The OCU already warned in October that the rise in energy costs was being passed on to prices. He then launched his price observatory until he quantified the rise this year of around 8%. The OCU establishes this percentage based on the monitoring of 15 typically Christmas products in the main Spanish cities. Of the monitored prices, a total of nine have gone up. Eels have risen especially, 53%, followed by clams (36%), oysters (28%), suckling lamb (22%) and sea bream (15%). None of them have ever been so expensive. On the contrary, among those that fell the most, barnacles (-27%), hake (-16%), poulard (-6%) and round veal (-5%) stand out. Other products, such as prawns, Iberian ham or red cabbage have barely changed their prices compared to last year at this time.

Nobody in the distribution sector is able to advance the future evolution of food prices. Not if a possible strike in the transport sector (called from December 20 to 22) will exacerbate supply problems. The future evolution of energy prices will be decisive but it is feared that the current increases will continue over time as a result of the psychological repositioning of prices and new costs that were not present a few months ago. An important element may be the role that the new food chain law will have in the coming months and the updating of contracts with suppliers in the primary sector. The recent reform of the law establishes the supervision that payments to suppliers are never below production costs. García Magarzo believes that the distribution sector, intermediaries and the industry must maintain “sustainable relationships” with producers and that the supply chain itself is capable of minimizing cost increases. “You can raise the remuneration for ranchers and farmers without affecting the consumer,” says the CEO of Asedas.

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