Why annual food prices have risen at the fastest rate in 13 years

Annual food prices have risen faster than at any time in 13 years.

The 8.3% jump last month from August 2021 was the biggest annual increase since the global financial crisis
in July 2009.

After Stats NZ released the new data, politicians moved quickly to assign blame. But one economist said a set of influences had come together to create a perfect storm for food prices.

ANZ chief economist Sharon Zollner said New Zealand is a major food exporter so rising global food prices generally benefit the country.

But benefits have not been distributed evenly, and Zollner said low-income people will suffer.

Year-on-year, fruit and vegetable prices in New Zealand are up 15%. Meat, poultry and fish were up 7.6% from August last year.

Prices for non-alcoholic beverages rose 4.1% and prices for restaurant meals and ready-to-eat foods rose 6.5%.

Food prices also rose more than 1% from a month ago – up 0.9% even after seasonal adjustment. Fruit and vegetable prices alone jumped 4.1% last month, up 2.3% even after seasonal adjustment.

Seasonal adjustment essentially took into account the fact that certain products invariably had price peaks in certain months.

Prices for meat, poultry and fish rose 1.2% last month.

Ingredients may include Putin, salaries, bad weather

If you wondered why your wallet was hurting, you could – depending on your political leanings – blame one or two causes, or even one or two people.

But Zollner said the causes were much broader than any national influence alone. And some timelines were much wider than our national election cycle.

Russia’s invasion of Ukraine had disrupted grain exports.

“Grain is an input into dairy and meat production globally,” Zollner said. The volatility of cereal prices had contributed to the increase in the prices of certain foodstuffs on a global scale.

Abnormal weather conditions could also wreak havoc with already volatile fruit and vegetable prices.

“Weather played a big role, especially in fruit and vegetables. We had extremely wet July and August,” Zollner said.

More and more Kiwis were leaving the country after years of waiting and a sclerotic process of reopening borders had yet to bring in new migrants to ease the pressure on employees desperate for workers.

“The agricultural sector has the highest wage growth in the entire economy, perhaps because it relied more on imported labor than other sectors,” Zollner said.

People were also paying more for groceries because all along the production and supply chain – from laborers to packers to drivers and stackers – wages and costs were rising.

Fuel was another volatile component, affecting shipping and road transport costs.

But a much longer-term global phenomenon was also at play, Zollner said.

The global human population is now estimated at 8 billion, and many of the world’s arable lands and other agricultural production areas are under frequent strain.

Zollner said some measures of progress in food production made during the Green Revolution after World War II had slowed.

And food waste and environmental degradation have undermined gains made elsewhere.

“Now it’s pretty clear that we’re within environmental limits and the world is going to face challenges to feed itself,” she said.

Satish Ranchhod, senior economist at Westpac, said the 8.3% annual rise in food prices was partly the result of poor growing conditions.

“However, the pressure on food prices has been widespread, with shortages of many items around the world, as well as sharp increases in production costs, including fuel, fertilizer and packaging materials,” he said. he added.

“We have also seen labor shortages and associated large increases in labor costs.”

Ranchhod said the labor crisis has pushed up production costs, especially for restaurants and take-out outlets.

And labor shortages have hampered the harvesting of produce and the processing of meat, he added.

The Act party said the Labor government and Prime Minister Jacinda Ardern had failed to address price hikes.

“The world’s first Instagram PM is clueless when it comes to dealing with these real-world issues, and Kiwis are paying the price,” said Act chief David Seymour.

“The problem is the government’s war on business and relentless borrowing and spending has fueled domestic inflation, which has crept into our most productive sector.”

He said the 8.3% year-on-year jump was even bigger than the 7.3% rise in the consumer price index (CPI) in the June quarter.

“When a food superpower like New Zealand has record food inflation, above the CPI, we can definitely say inflation is a local problem, caused by Labour’s economic mismanagement,” Seymour added.

He said New Zealand needed to become more productive by tackling labor shortages.

“Overseas workers should be able to work for accredited employers as long as they are employed in accordance with New Zealand law.”

The Green Party said the government should urgently increase support for people struggling to pay for food.

Ricardo Menéndez March, the party’s trade and consumer spokesman, said an inequality crisis was unfolding.

“The first step the government must take is to immediately increase people’s incomes, including those who depend on benefits to make ends meet,” he said.

“The Green Party is clear that everyone should have enough income to pay the bills and live a good life.”

Ricardo Menéndez March said that even before the current pressures on the cost of living, tens of thousands of families were forced to go without basic necessities.

Today’s statistics follow months of bad news for consumers.

Last month, data from StatsNZ showed fruit and vegetable prices jumped 10% in just one year.

In June, annual food price inflation was 6.8%.

Earlier in the year, cheddar cheese, milk and eggs were major contributors to rising grocery bills.

Some economists have told the Herald in recent weeks that inflation has likely peaked. The country’s GDP data is due out on Thursday.