Food prices rose again in February. nor correction energy prices in recent months VAT deduction In a wide product basket, they managed to close with an increase of more than 15% in food prices for now, according to INE’s Consumer Price Index (CPI) statistics. First Vice President Nadia Kalvino He says time needs to be given for the reduction in costs and the Government’s measures to be clearly transferred to the final price of food. And the Minister of Agriculture, Luis PlanasAccording to the results of the price analysis carried out by the company in February, it opened the door to fine-tuning the measures approved at the end of December 2022. National Institute of Statistics (INE) on March 14, when final CPI data for February was released earlier this Tuesday. There are several reasons that prevent us from seeing even a moderation in food prices.
Delayed effective energy costs
Electricity and fuels form an important part of the cost structure of agricultural and livestock production. Energy prices started to register increases of more than 20% in April 2021, but until March of the following year, the increase in food prices remained below the general CPI index. This shows that the inclusion of energy costs in food prices is clearly lagging behind. It is possible that the slowdown in energy prices, which became evident in October 2022, will also come late to the food ticket.
Raw materials and packaging
Agricultural organization COAG estimates that production costs in agriculture and animal husbandry have increased by 55 percent to 60 percent on average in the last two months, and argues that this increase in input costs is not reflected in prices. The tension in energy prices, which started with Russia’s invasion of Ukraine, also affected feed and fertilizer from the very beginning. According to a PWC study from October 2022 for the producers and distributors association AECOC, barley feed increased by 94%. Fertilizer prices tripled last year, according to the Ministry of Agriculture. The AECOC report also estimates the cost of containers and packaging for most beverages and foods to be 20%. The initial limitation on the transfer of these costs to the final price, both in the primary sector and in the processing industry, predicts a lagged effect on the final price and provides another argument for a relative prolongation of the rise in food prices. According to the complaint of Andrés Góngora, head of the COAG fruit and vegetable sector, the Government has approved $300 million in aid to offset the rise in fertilizer costs, but the design of the measure will prevent it from fulfilling its mission. .
new plastic tax
The new tax on unused plastic containers, which came into effect on January 1, 2023, has become an additional element making some foods more expensive from the start of the year. The new tax charges 0.45 euros for every kilogram of non-recycled plastic found in taxable products. According to the Spanish Federation of Food and Beverage Industries (FIAB), the collection impact of this tax on the food sector is approximately €690 million, exceeding even the budgetary impact estimated for VAT reduction on food approved by the Government. On December 27th (660 million) effective through June.
supermarket margin
The government’s second vice-president, Yolanda Díaz, is focusing on supermarkets’ trade margins as she looks for those responsible for the persistent rise in food prices. That’s why Díaz proposes capping food prices as a way to limit the commercial distribution margin. But the measure is not well received by farmers and ranchers: Andrés Góngora of COAG underlines the strength, warning that “When you talk about setting a cap on the price, it means you set a cap on the origin of the price”: according to him, in its relationship to the primary sector. distribution. Manufacturers and distributors association AECOC argues that the industry has reduced its margins from the year before the pandemic, giving some examples: Potato chips production costs have increased by 72% since January 2021, while PVP did. ie 17%; the production costs of sausages increased by 57% and their prices by only 6%; According to AECOC, bread production costs have increased by 43% since January 2021, while the retail price has increased by 15%.
Harvest failures and farm closures
Bad harvests, such as olives or winter vegetables, or the closure of livestock farms, such as dairy farms, have raised origin prices for some agri-food products. According to Ministry of Agriculture data, the price of different olive oil categories is currently 60% higher on average than the previous campaign and 100% higher than the average of the previous four campaigns. The raw material is not the only cost that supports olive oil purchased from the supermarket, but it is the main cost. In January, olive oil recorded an annual increase of 30.5% according to CPI statistics. The raw milk price paid to the farmer reached 57.96 euros per 100 kilos in December, increasing 64.0 percent compared to the same month of the previous year. The average price for the January-December 2022 period was 41.8% higher than the average price for the same period of the last 5 years. According to CPI statistics, milk on the supermarket shelf increased by 33.4%.