Food prices have risen sharply in recent months. On average we pay 18.4% more for food and drink at the supermarket than we did a year ago. But while the price of food is rising, food prices are falling, writes the journal Economic Statistical Reports. Editor-in-Chief Jasper Lukkezen: “The difference is huge.”
“Food prices increased by 18.4% compared to last year, while food commodity prices decreased by 20% according to a global index,” explains Lukkezen. According to the BSE editor-in-chief, it’s very easy to call this “inflation from hoarding of supermarkets, farmers and everything in between,” but he says there are several economic explanations for it.
Ill will
Supermarkets don’t know what prices will do in the future, says Lukkezen. ‘Companies need to deal with uncertainty and then take the extra step to avoid the risk of losses. Some time ago they decided to raise their food prices now that food prices are going down all over the world. So the profit remains. It is not necessarily ill will.’
Also, sellers expect price increases. ‘If farmers, supermarkets or industry expect wages and costs to rise, they suddenly raise prices more than necessary. ‘Consumer prices may therefore not move for a long time and jump suddenly.’
Global Import Center
According to Lukkezen, we pay “relatively little for food and drink” in the Netherlands. ‘Because we produce a lot of food and drink here and are a global import hub for food. We are above it. And we also have a relatively efficient food industry. The expectation is that prices will go down in the long run. According to the finance ministry, it will take six to eighteen months for lower purchase prices to translate into lower selling prices.
‘According to the Ministry of Finance, it will take six to eighteen months for lower purchase prices to translate into lower selling prices’
Excessive profit
Naturally, according to Lukkezen, companies make “excessive profits.” “If wages go up about 5%, purchase prices go down and selling prices go up, that simply leads to higher profits for these companies. However, the debate revolves around whether this can be considered excessive. If further wage increases and other costs rise in the short term, those profits will shrink or even disappear.
A Rabobank study two weeks ago showed that of the 11.8% inflation for 2022, 2.2% can be attributed to higher selling prices. A large part of the increase therefore ends up in companies as extra profit.
You can also see it in the food industry, right at the beginning of the supply chain, with farmers. The ECB also recently released a report that the agricultural sector in Europe has made significant excess profits in recent years because food prices have risen so rapidly.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
