Food Inflation - Little Link Between Retail Prices and Input Costs, Livestock Farmers Disadvantaged

The hoo-ha about food price inflation which swept the media last week prompted an attempt to disentangle sensationalist headlines from fact. I turned to the independent and usually reliable Office of National Statistics to check their Retail Price Index figures, and what started out as a fact finding mission uncovered some worrying numbers. In a nutshell, there are massive differences in retail inflation between agricultural sectors, and in most cases they bear little relation to input costs, upon which retail price changes are usually based.

Here are the ONS numbers for the 12 months to March 2008 compared with the previous year:
Total Food +6%
Butter +35%
Eggs +32%
Cheese +16%
Milk + 14%
Bread +12%
Poultry +9%
Fresh Veg +5%
Fresh Fruit +4%
Beef +4%
Pork +3%
Lamb -1%*
Fresh Fish -2%
*Home produced lamb inflation +2%, imported minus 3%.

According to a survey by buying group Anglia Farmers, input cost rises across the sectors for the 6 months to April are follows, with the cost increases for the previous 12 months to September 2007 in brackets:

Total Agri Inflation +17% (+7)
Dairy +22% (+9)
Beef and Lamb +19% (+7)
Cereals and OSR + 16% (+6)
Potatoes +12% (+9)

The differences in timing between the surveys mean detailed comparisons are not possible, but what is clear is that huge cost pressures being faced by beef and sheep farmers are not reflected in retail prices.

Many will argue that inflation is complex, that costs are not just about the raw material, which is affected by supply and demand, and accounts for just a part of overall prices, and that in some cases retailers will absorb cost increases but not put retail prices up. All of which is true of course. Nevertheless, one is left with a feeling that achieving appropriate price increases is connected to the ability of different sectors to put their case. The dairy sector was undoubtedly helped by publicity about the plight of the dairy farmer, and cereals by widely reported world price issues.

So, who is speaking up for beef, sheep and pig farmers? The pig industry is making some headway with presenting their case. There's very little about beef and sheep though. Yes, livestock prices to farmers are increasing just now due to external factors such as rising lamb exports and falling beef imports, but they are not increasing enough. Farmers must continue piling the pressure on to industry groups to publicise the huge issues livestock farmers face trying to make a living.