When will food prices start to fall?
Food prices STILL rising at 19% a year: experts say they’ve reached their ‘peak’, but will they ever return to normal?
- Shoppers are paying near-record prices at supermarket checkouts
- But while prices may have peaked, experts say it will be months before they fall
Food prices are rising at near record levels, leaving households wondering when crippling grocery bills will start to fall again.
According to the Office for National Statistics, the cost of food rose 19.3 percent in the year to April, down slightly from 19.6 percent in March.
Total inflation fell from 10.1 percent to 8.7 percent in the same period.
Experts say there is good news and bad news with the price of food this year.
The good news is that food prices have almost certainly peaked. But the bad news is that grocery bills will remain above normal for at least the rest of this year.
Mixed news on food: Experts say prices will start to fall this year, but very slowly
When will food prices start to fall?
According to Julian Jessop, Economics Fellow at the Institute of Economic Affairs think tank, the cost of shopping could drop slightly from the coming weeks.
Jessop said: “At least there was some more evidence today that pipeline cost pressures are easing, including producer price inflation in the food sector. May’s inflation figures should therefore be better.’
Richard Lim, chief executive of consultants Retail Economics, thinks food price inflation could fall by about 50 percent this year.
Lim said, “I think what we’ve seen with food prices at the factory gate, it looks like it’s peaked and it looks like it’s on its way down.
“If you look at other periods in history where we’ve seen food inflation, like the last financial crisis, we saw it was over 10 percent. it took about 10 to 11 months for that to drop from its peak to about the halfway mark.
“The source of current inflation is different, but using that as a guideline, we can expect food price inflation to fall to a much more manageable level by the end of the year, probably half of what it is now, or something fewer.’
However, grocery bills are likely to remain high for the rest of the year and could even exceed the cost of utility bills, some experts say.
Alice Haine, personal finance analyst at investment firm Bestinvest, said that “food prices are expected to remain high for the rest of the year, with food bills overtaking energy prices as the main factor in the cost of living crisis.”
Which food prices fall first?
Lim said food prices tend to rise and fall slowly, as food retailers tend to have contracts and hedges to lock prices in for certain periods.
However, fresh food prices are likely to fall first. That’s because around 70 per cent of the UK’s fresh food is grown here, meaning a shorter supply chain that can more quickly pass falling costs on to consumers.
Price declines are likely to be slower for environmental foods, such as canned goods, as there are more imports and also more packaging costs to account for.
Why is food so expensive?
The costs for a supermarket to do business are rising, and that is being passed on to the consumer.
The price customers pay at the checkout should cover all the costs of a supermarket, and many of them have increased enormously.
Supermarkets charge higher prices from their own suppliers and also face higher bills for wages, utility bills and rent from their stores.
The Russian war against Ukraine also has an impact on supermarket prices.
The conflict has increased fuel prices, energy prices and the cost of fertilizers, making it more expensive to grow and transport food.
Haine added: “While supermarkets have been accused of ‘greed’, the problem is more deeply rooted with poor harvests, bird flu and the fallout from the war in Ukraine all taking a toll on supply chains.”