{"id":44865,"date":"2024-01-04T13:00:02","date_gmt":"2024-01-04T12:00:02","guid":{"rendered":"https:\/\/www.accuracy.com\/?p=44865"},"modified":"2024-09-12T14:32:52","modified_gmt":"2024-09-12T12:32:52","slug":"how-can-we-ensure-that-food-prices-are-sound","status":"publish","type":"post","link":"https:\/\/www.accuracy.com\/en_gb\/how-can-we-ensure-that-food-prices-are-sound\/","title":{"rendered":"How can we ensure that food prices are sound?"},"content":{"rendered":"

Food crises, with their resulting famines, have marked the history of the world<\/strong>. They are still very much part of the present in poorer countries, but this is no longer the case in the developed world, despite \u2018pockets\u2019 of poverty still existing.<\/strong> Whether in the United States or in Europe, a sense of security has developed, with the weight of food in the household shopping basket falling significantly over time (in France, for example, from 30% in 1960 to 17% in 2020) and food price developments remaining both low and steady. The question of purchasing power was more a matter of income and price dynamics in other areas, like energy sometimes and housing often. But this stable and reassuring landscape has been transformed<\/strong> (or should that be deformed?) in recent years<\/strong>, with the Covid-19 pandemic followed by the Russian war in Ukraine. Now, we must all pay attention again to the price of what we put on our plates. What happened exactly?<\/strong><\/p>\n

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Let\u2019s look at the American case<\/strong> (the analysis can be duplicated for the eurozone). We can see an initial acceleration phase in food prices in spring 2020<\/strong> (a doubling of the year-on-year increase, but still a reasonable trend overall; put simply, from +2% to +4%), then a second phase two years later <\/strong>(up to +10%). The slowdown starts at the beginning of 2023, but a return to normal is still not fully reached by the end of the year<\/strong>. This, of course, contributed to the stronger overall inflation trend (food accounts for more than 14% of the general consumer price index), though energy, which became much dearer, goes further to explain the rise.<\/p>\n

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The public health and geopolitical context of the last three years or so has obviously been exceptional.\u00a0 Nevertheless, it is worth taking a closer look at the process that led to the acceleration of food prices.<\/strong> To do so, let\u2019s head to Europe (once again, the demonstration is largely valid on both sides of the Atlantic).\u00a0 We can go upstream in the processing of food products and stop at the commodity level. Prices are volatile; this comes as no surprise. Usually, at least over a period of more than 25 years, the \u2018line loss\u2019 shock absorption, starting with a sometimes brutal bullish movement in commodities and then moving downstream<\/strong> (i.e. following the transformation process from commodity to finished product available to the consumer), is significant, with price acceleration becoming increasingly attenuated the further downstream we go<\/strong>. This was the case in 2007\u20132008 and again in 2010\u20132011; the sharp rise in the index of food commodity prices only led to a relatively moderate rise in food prices, first at producer level and then at consumer level. This time, however, following an initial shock on a relatively \u2018normal\u2019 scale, the downstream reaction was much more significant. Why? <\/strong><\/p>\n

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Food commodity prices are sensitive to climatic conditions and any other events that can hinder production or transport. Geopolitical crises come to mind here. Whilst demand is more stable, uncertainty around supply explains the permanent sense of nervousness. It is normally absorbed for the most part, simply because the weight of these raw commodities in price formation for end-consumer demand is fairly modest: 10% in the case of Canada.<\/strong> It is not too different for many other developed countries. We can conclude then that the issue also \u2013 and above all \u2013 lies elsewhere. <\/strong><\/p>\n

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What has happened over the past few years? A lot!<\/strong><\/p>\n