The conflict in Ukraine continues to exert upward pressure on food prices. Especially those of oil, which have increased by 56% in Spain since the beginning of 2021when it started rising commodity prices food. In addition, other staples for any shopping basket such as cereals have also become more expensive by 17%, while dairy products and eggs made up 16% and meat, 10%.
This is revealed by Bank of Spainwhich ensures that “the rise in the prices of food raw materials which is taking place on a global scale has a strong impact on consumer prices of these products faced by households”. It did so through a report entitled “Rising Food Commodity Prices and Their Transfer to Consumer Prices in the Eurozone”.
A detailed analysis of the different food groups shows that price increases are very widespread and intense for everyone in the euro zone. In June, the price of oil in the euro zone increased by 29% year on year, that of cereals and coffee by 11%, while dairy products and eggs and meat increased by around 12%. During this month, in Spain, the price of oil increased by 37% year-on-year, and cereals, coffee, dairy products and eggs, as well as meat, by around 16%, 11%, 16% and 10%. , respectively.
As a consequence of these dynamics, since January 2021, in the euro zone, oil is now 34% more expensive, and cereals and dairy products and eggs are respectively 12% and 13% more expensive. In Spain, prices have mostly increased since the beginning of 2021: 56% for oil, 17% for cereals, 16% for dairy products and eggs, and 10% for meat.
The weight of the food in the basket largely determines the heterogeneous impact of the increase in the price of food commodities in different countries. While in the euro zone as a whole, this weight amounts to 17% and food contributed 0.9 percentage points to the increase in the harmonized index of consumer prices (HICP ), on average, in the last three quarters, in Spain, the weight amounts to 22% and the average contribution has been 1.4 pp.
According to the most recent information, corresponding to the month of June, the contribution of food to the general inflation rate in Spain was 2.9 points, compared to 1.7 points in the EMU. All in all, the Bank of Spain estimates that a temporary increase of 10% in the rate of change in food commodity prices has repercussions on an increase in total inflation in the euro area (HICP) of around three tenths after twelve months .
The future course of food prices is subject to “high uncertainty”, as the report warns. Although available forecasts, both from institutions such as the World Bank and food futures markets, indicate that some downward trend in the coming years.
According to the Bank of Spain, on the one hand, these countries are important producers of food raw materials, such as cereals, and their production and export capacities are considerably limited.
On the other hand, conflict affects energy and fertilizer priceswhich are two crucial supplies in the production processes of agricultural activities.
He also points out that rising prices and supply disruptions from Russia and Ukraine, as well as some adverse weather developments, are leading some countries to ban or impose restrictions on exports of certain food products, implying additional strain on global food supply chainswith the potential to generate very persistent additional increases in international prices.