The basket faces a new season of shocks. After a record international food price in 2022 and a continued de-escalation in 2023, the index which reflects variations in the main elements of the basic basket is rebounding strongly again. It’s already in your maximum value of the last 18 months.
In the spotlight are grains, vegetable oils in general, dairy products and sugar, which in turn influence dozens of foods – since soft drinks with fried tomatoes or vegetable creams-, driving up its price.
This is reflected in the latest data from the FAO World Price Index, which analyzes different food prices and serves as a guide to see what will hit the shelves next.
His diagnosis: Prices generally increased 2% from September to October for a multitude of reasons, ranging from fears of short harvests due to the effects of increasing climate tensions in the Black Sea region. Thanks to this surge, we are now at the highest since April 2023, although still 20.5% below the all-time high reached in March 2022.
Only meat prices are falling, although almost imperceptibly (0.3%), and in reality the only notable relief expected in the short term is, paradoxically, what has been the biggest headache in recent times. time, olive oil.
Oil, rare bird
Liquid gold continues its decline and is currently at its lowest price level this year originally, according to data collected by the Infaoliva observatory. Extra virgin costs 5.5 euros per kilo originally; the virgin, 5 euros and the lampante, 4.9 euros.
These prices generally take around three weeks to be reflected on the shelves, where they arrive with a mark-up for bottling and transport which is ultimately between 1.5 euros and 2 euros, which gives an idea of the autumn which could be seen as early as December in supermarkets.
Original prices of different varieties of oil.
Infaoliva.
In any case, this was a behavior expected by sector agents thanks to the improvement in weather conditions recorded in the spring, which suggested a larger harvest. The olive harvest began in October and will give way to oil production which will, according to forecasts, be 50% more than the previous year and will be approximately 1.26 million tonnes.
If the forecast comes true, olive oil will get its first near-normal harvest after two years of drought, which would lead to a notable drop in prices. The big names in the sector estimate that the liter it can still be around 5 euros at the end of this year or early 2025.
Increase in bread, milk and sugar
The rest offer a worse outlook due to a multitude of factors. The FAO says the cause of the increase in cereal prices is concern over adverse weather conditions in the crops of the main exporters in the northern hemisphere: the United States, Russia and the EU.
The reintroduction of an unofficial minimum price in Russia and growing tensions in the Black Sea region also had an impact on grains, which rose 0.8%. Also shuck the corn strong domestic demand from Brazilthat it cannot be planted in Argentina and that demand for Ukrainian grain remains strong.
Rice, down 5.6% due to expectations of greater competition among exporters, failed to buck the trend in this category. Prices of palm, soybean, sunflower and rapeseed oil are also increasing (7.3%), which are now at their highest level in the last two years.
Because? Less palm oil was produced in Southeast Asia, and the expectation of reduced production of sunflower and rapeseed oil in the next harvest drove up prices for the latter.
As for dairy products, they became more expensive by 1.9% last month (and are 21.4% more expensive than a year ago), as stronger domestic demand means there is less product available for export. This is the case for cheese and butter, which have been increasing for 13 consecutive months, to the surprise of international markets.
Finally, sugar rises 2.6% due to ‘ongoing concern’ for production prospects in Brazil. Additionally, rising international crude oil prices have spurred greater use of sugarcane for ethanol production in this country, further driving up prices.
Citrus fruits destroyed by DANA
What’s missing from this photograph is the impact that can occur in another important food category: fruit. This segment is not included in the FAO index, but there are also fears about its availability and therefore its price due to DANA, which has devastated 20,000 hectares of citrus fruits, persimmons, wine grapes and other woody crops in the Valencian Community, according to first estimates from Agroseguro.
The food increases are recorded in the same month in which our country began to end gradually reduce VAT on food products. On October 1, the VAT rate of 2% on food products was applied which until then were at 0%, such as oil and basic products, while pasta and other oils went from 5 to 7.5%.
These reductions were activated in December 2022, when Food prices hit record highs, hitting 15.7%the highest level since 1994. It was at this time that the reduction of this tax came into force as one of the flagship measures of the anti-crisis package that the Government approved to mitigate the effects of the war in Ukraine.
This measure involves the elimination of VAT on basic products such as bread or milk from January 1, 2023, and the reduction of VAT on oil and pasta from 10% to 5%. Initially it was supposed to last six months, but this was extended.
