Food prices are not giving up and the downward spiral will continue in 2023

Do not loosen the seat belts, the inflation will continue to sit in the passenger seat, casting a long shadow on the shopping cart. Behind this fact lies a reality perfect storm Formed by the combination of escalating production costs, endless monetary policy of price constraint, decline in key products such as olive oil due to lack of rain, as well as some energy and fuel prices runaway from before the war in Ukraine. All of these factors are exacerbated by international markets, where “commodities” such as wheat, corn and sugar are experiencing exponential increases.

According to the latest monthly bulletin on prices of agricultural products from the European Commission, andSoft wheat grew by 27.7% in one year Doro did so by 24.4%, while corn rose 33.2% and sugar 11.3%. This week’s extension of the agreement to export grain from Ukraine, via Turkey, is just a small breath of fresh air.

Only in October, prices for food and non-alcoholic beverages added up by 15.4% compared to the same month in 2021, according to the National Institute of Statistics. This week’s known fact assumes The biggest rise since January 1994. On top of this development are the “usual suspects” (legumes, milk, eggs, cereals…) with sugar (42.8%) as a cover. After this product, the increase increases in eggs (25.5%), oils and fats (23.9%), legumes and vegetables (25.7%), milk (25%), cereals (22.1%), as well as potatoes (19.9%) and poultry (18.3%). %), beef (14.9%) and bread (14.9%).

Agriculture Minister Luis Planas stressed this week that we are facing “The problem of costs, not business margins». Planas defended that “they’ll probably stabilize between now and Christmas, but we won’t be able to reduce them” and expressed confidence that “at the beginning of next year, just as we’ve achieved with the general inflation data, food prices will drop significantly.”

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We must remember that in October, it was inflation It fell to 7.3% at the annual rate (it reached 10.8% in July). This places Spain among the eurozone countries with the lowest rate, along with France (7.1%) and Malta (7.4%), compared to Hungary (21.9%), Estonia (22.5%) and Lithuania (22.1%). However, the core, which excludes unprocessed food and energy, remained at 6.2%.

View experts consulted by ABC More pessimistic than Planas On the development of the consumer price index I agree that the spiral in which food suffers will not abate in 2023. Daniel Arnaiz, professor of economics and business at the European University, warns that “the fact that the rate is decreasing from one month to the next does not decrease and this means that inflation is taking place In declining »and he adds that « it may have increased in absolute terms just as it is ». This means that it appears to be falling, but in reality it is not falling, as he explains.

Juan Carlos Higueras, professor at the EAE Business School, spoke in similar terms, and also asked “Don’t confuse low inflation with low prices, because it measures price variation over a 12-month period ». He explains that previous months were not counted, which also added increments.

Regarding the current escalation of the shopping cart, Arnáiz connects the difficulties that many Spanish families face with Three external factors: Political instability caused by the Russian invasion of Ukraine, the European Union’s energy strategy and the Common Agricultural Policy (CAP). He accuses the latter of “reducing the productive capacity of the countries of the South in favor of third non-member countries, such as Ukraine”. In his view, all of the above made European productivity highly dependent on international relations. In addition, he believes that behind the current wave of inflation is also the “price percentage-based” tax system, because when prices rise, the tax burden increases, referring to the value-added tax. This expert urges a readjustment of tax rates.

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The prognosis of the EAE Business School professor is no less optimistic. “There is a way to Food prices continue to riseBecause it is an essential commodity and producers still suffer losses or very low profit margins. He blames some on cost overruns and “future expectations”.

The Price Farmers Pay Index, compiled by the Department of Agriculture, puts a figure on the additional costs that imprison producers. Explain that file Fertilizers are 92.28% more expensive Between July of this year and the same month of the previous year, which recorded an average increase of 37.71% in animal feed. The index reflects that electricity prices are 99.45% higher in the seventh month of the year compared to July 2021 and that fuel prices increased by 85.77% in the same period.

From the Spanish Economics Department of CaixaBank Research, economist Javier Ibáñez de Aldecoa believes that the current rise in food prices will continue its upward trend over the next few months and gives three reasons: «problems in the international supply of agricultural products (bottlenecks, for example) high prices for fertilizers and energy. On that last point, he thinks, “It’s still out there Indirect impact on agricultural energy priceswhich may have some delays, so we still see the impact of the previous months’ upswing.

Higueras (EAE Business School) and Arnáiz (Universidad Europea) add two more variables to justify the inflationary escalation: the ECB’s monetary policy and “Second Round Effects”Which is what happens when inflation is converted into salaries, and public spending increases. “We’ll have an inflation brake or a flat brake,” comments an EAE Business School professor. For Arnaiz “You can’t fight 10% inflation with 0.5% interest rate increases.”

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At CaixaBank Research, they highlight that PR

imario is one of the companies with the most energy bill. They estimate that this activity already allocates 10% of its income to paying for electricity as opposed to 20% for fishing (adding fuel). In any case, Professor Ibanez rules out “more abrupt drops in general inflation” since then Reference gas prices will rise “With cooler temperatures” He attributes the fall in inflation in October (7.3% compared to 8.9% in September) to light.

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