Price Rises On Staple Foods: What’s Increased Most And Why

Inflation and the cost of living make global headlines daily and food has been the biggest contributor to the crisis. How can the price of such a simple and necessary commodity have risen so much and still be increasing?

It’s no secret to anyone who’s gulped when producing their bank card at a supermarket checkout that the price we consumers pay for food has been skyrocketing in the last year or two.

Global e-commerce platform, Ubuy.com, conducted a study in April 2023 to see which had experienced the biggest price increases in food out of the US, EU, UK, Australia and Canada. They found that, over the last year, the EU and UK experienced over twice the inflation hike on food than the other countries; a whopping 19.6 per cent against 9 per cent in Australia, 8.9 per cent in Canada and 8.5 per cent in the US. The forecast into 2024 from tradingeconomics.com seems to bring consumers a ray of light with food inflation dropping from an average of well over 10 per cent in the EU to nearer 5 per cent by April 2024.

What we consumers need to remember however, is that this simply means that food will continue to get more expensive, just not as fast as it has been in 2023.

Food With Biggest Price Increases

Conventional wisdom often says that it’s processed foods that increase in price the most, however in the last few years it is the absolute staples of life such as bread, eggs, dairy and cheese, rice, sugar and edible oils that have seen the biggest rises.

The EU’s Eurostat site reports that eggs were an incredible 30 per cent more expensive in January 2023 than a year earlier and, though inflation has reduced a little since then, the average price in April was still over 22 per cent than a year before. 

The New York Times looked at the price increases of staple foods across the EU in April and found staggering increases in every day basket items such as sugar, potatoes, cheese, milk and eggs.

Causes of Staple Food Price Increases

Huge price increases on food basics can be confounding when they don’t need as much processing and packaging as other food, however the staples have been tossed about in a perfect storm of circumstances.

The United Nations addresses the main causes in its monthly bulletin for August 2023. 

COVID

Though the pandemic now seems like a lifetime away, it was the catalyst for the start of the incredible food price rises we now suffer. Back in 2020 the pandemic was rife, and global production was going offline as nations locked down. Although demand for products decreased as society went into hiding, the aftershocks included crippling supply chain disruption and manufacturing bottlenecks with the result that demand far outstripped supply and prices rose.

War In Ukraine

Ukraine is often referred to as the world’s ‘bread basket’ and is a major agricultural producer of grains, including wheat and sunflower as well as fertilisers. When Russia invaded it moved quickly to shut down the all-important Black Sea ports from which food and fertilisers were shipped.

In July 2022 Russia agreed to the Black Sea Grain Initiative which secured safe passage out of Ukrainian ports for food, most of which were bound for developing countries in Africa. The agreement expired in May 2023 with Russia failing to agree to an extension and so, once again, exports of food were crippled and the price of grain and fertiliser rose along with the demand for a smaller global supply.

Food Protectionism

Some countries who are major producers, in response to rising domestic food prices, have moved to ban the export of some basics or have imposed massive duty increases.

One such country is India, which produces 40 per cent of the rice sold globally. In response to price increases on non-Basmati rice of 30 per cent in a year, the Indian Government announced in July 2023 that it was banning the export of all non-Basmati rice in order to calm the price of it domestically. It has since announced a 40 per cent export duty on onions until the end of the year.

Such action increases demand for the supply from other countries who produce the commodity and, in a seller’s market, the price for that food stuff increases.

Labour Costs

One of the unforeseen aftershocks of COVID in developed countries has been dubbed ‘the great resignation’. After long periods of lockdown and furlough a significant number of workers, particularly in the 50-plus age bracket, decided to retire early.

Added to that phenomenon was an increase in economically inactive people due to increasing rates of illness. The United Kingdom suffered the triple whammy of Brexit; finding that without the free-flow of workers from the EU, vacancies were hard to fill.

Employers in developed countries suddenly found themselves needing to offer higher salaries to attract new staff and give current staff wage increases in order to stop them jumping ship to competitors.

The situation has since been compounded as workers responded to increasing inflation and the cost of living crisis by demanding wage increases. The ripple effect on food is that it costs more in labour from production to distribution and retail and this adds to the price of it.

Climate Change

We seem to be assaulted by dramatic weather events on a weekly basis with a parade of floods, droughts, storms, wildfires and extreme temperatures (at either end) across the news.

Whilst many relate to these climate events on a personal level when holidays are disrupted or gas and electricity bills go up in response to cold spells, the biggest impact is almost certainly on food production.

In Spain, several years of drought has resulted in poor olive harvests and the price of olive oil so high it’s now referred to as ‘liquid gold’. Floods in Pakistan have reduced the amount of rice produced, unfortunately coinciding with India’s export ban.

Columbia, one of the world’s biggest coffee exporters, has seen production fall by 10 per cent so far in 2023 due to extreme cold snaps and droughts. More worryingly, predictions are that climate change will have such an impact on coffee growing conditions that global production of it will halve by 2025.

All across the globe, unprecedented weather events are resulting in poor or lost crops and lower meat production with an inevitable impact on market prices for food.

Greedflation

In developed countries most industries are becoming increasingly concentrated; in other words the big fish gobble up the smaller fish leaving fewer fish in the pond to compete with. The food industry is no exception.

The United Nations reports that, in the US, more than half the price increase in food during the final quarter of 2022 was driven by higher profits. In the EU it has been estimated that corporate profits account for over half the increase in inflation over the last two years. Even now, as global food inflation calms, the profits of these corporate behemoths increase as any benefits to lowering inflation are filtered through to consumers at glacial pace.

No Easy Solutions In Sight

The fact that there doesn’t seem to be a ready solution to all these causes of rampant inflation to staple food prices suggests that consumers will keep seeing the cost of their basics going up. Certainly, international non-governmental groups are concerned that growing food prices are pushing more people into poverty and increasing food insecurity globally. We tend to think of wars being fought over declining fossil fuels, but it may come to pass that food becomes the commodity that nations start seeking to protect by force.