Hefty rise in food industry prices

11/03/2008 15:00

Food manufacturers been raising the prices of their products on the domestic market almost continuously since mid-2006. Producers’ prices for food were more than 16 percent higher in January 2008 than twelve months previously. Oils and fats, and dairy and flour products in particular have undergone hefty price increases. Part of these
increases are passed on to consumers.

Prices of food products

Prices of food products

Oil prices rise by most

The price increases were largest for animal and vegetable oils. These cost over 45 percent more than twelve months previously. Prices of animal feed, flour and dairy products were around 30 percent higher. Prices of other food products rose more moderately.

Producers’ prices of food products,  January 2008

Producers’ prices of food products,  January 2008

Consumers also paying more

Higher factory gate prices in the food industry have also resulted in substantial rises in consumer prices. Consumers paid 16 percent more for dairy products in February this year than in the same month last year. Retail prices of oils and fats were 11 percent higher, those of bread and cereal products just over 7 percent higher. Consumer prices rose by less than producers’ prices, as the price retailers pay for the products is only one component of the price they charge in the shops.

Most dairy prices falling again

Last summer factory gate prices of milk powder were about 80 percent higher than twelve months previously. Since then they have come down again. Prices of cheese and butter rose strongly in the autumn of 2007, but they, too, are now decreasing again. Factory gate prices of milk and cream on the other hand have increased steadily in the last year. In January they were some 20 percent higher than in January last year.

Prices of dairy products

Prices of dairy products

Commodity prices also up on world market

World market prices of agricultural commodities have also risen strongly. The wheat price has nearly doubled in the space of one year. This is a consequence of the strong increase in meat consumption in Asia, which has pushed up heftily the demand for cereal products. Commodities such as maize and palm oil are being used more and more to produce biofuels. In addition, failed cereal crops in Australia have diminished the supply.

World market commodity prices, January 2008

World market commodity prices, January 2008

Gerard Taal and Henk Verduin