Food prices going up, British shoppers warned
Published 08/09/2007 | 11:54
For decades, Britons have spent an ever-smaller proportion of their income feeding themselves, but now food experts say price rises mean the era of cheap food is coming to an end. The price of bread and milk is rising and poultry and meat producers warn they can no longer keep down spiralling production costs.
This week, the food industry and the United Nations predicted that a combination of factors would result in higher prices for everyday staples, with potentially devastating consequences for countries around the world.
Premier Foods, one of the UK's leading food conglomerates with brands spanning Oxo to Mr Kipling, warned that "violent changes" in commodity prices were bringing to a close almost 15 years of low food inflation.
The company's chief executive, Robert Schofield, presenting interim results on Tuesday, told the City: "Over the past 30 years, the cost of food as a proportion of disposable income has come down from 30 per cent to less than 10 per cent. I think we've got two or three years of inflation at the very least." Premier, which owns Hovis, said any further rise in the wheat price would lead to rises in the price of a loaf.
Yesterday the head of the UN's Food and Agriculture Organisation, Jacques Diouf, said surging prices for wheat, corn and milk had the potential for social tension and, eventually, political problems. While food may be less than 10 per cent of the household budget in the developed world, in poorer countries it was 65 per cent. "If we continue to see an increase in their prices, and in their import bill for food, there is a serious potential problem," he told the Financial Times.
This week European wheat prices surged to a record high, with futures contracts doubling since April. The National Association of British and Irish Millers has warned of further increases in the price of bread. Meat producers too are feeling the pinch, largely as a result of increases in the cost of feed for animals; wheat again. And global prices for milk have soared as Chinese consumers have developed a taste for dairy products.
Tim Lang, professor of food policy at City University in London, said the era of cheap food was ending and its consequences would be dramatic, for the developing countries and for the poor in Britain. He believes prices will rise globally for decades because of four factors; population increase, water shortages, increased biofuel production and climate change.
The global population is forecast to rise from six billion to nine billion in the next 50 years and, in a process known as nutrition transition, wealthier consumers in developing countries such as India, China and Brazil are demanding more meat and dairy products.
Demand for water essential for irrigating crops will increase during this dramatic rise in population. Increasingly large amounts of agricultural land will be turned over to growing biofuels as oil runs out.
And last, says Professor Lang, climate change will alter the viability of agriculture in ways that cannot yet be accurately predicted, at a time when demand for food is rising sharply.
He believes the world has a choice: continue feeding large amounts of grain to animals or reduce meat consumption. "The era of cheap meat once or twice a day has to end," he said. "We have been living for a long, long time with the expectation of cheap food and plentiful supply. What the UN is raising is that we have entered an era of restructuring. This is big league. It is not a little blip."
Kevin Hawkins, director general of he British Retail Consortium, which represents British shops, believes the gloomy predictions have been overdone. He said prices for wheat-based products including bread, biscuits and cereals were under pressure, more complex processed foods were relatively unaffected. In any case supermarkets would keep price rises lower than doom-mongers predicted. "The impact on consumers in prices will be small," he added. "The era of cheap food is not over."
More for meat and bread
Meat prices are expected to rise across the board in coming months. Asda has made much play of having a £2 chicken, but Tesco said it was putting up the price of pork and poultry to reflect rising costs. Sir Terry Leahy, Tesco's chief executive, said that low prices were not sustainable. Last month, the accountants Deloitte predicted meat prices would rise because of the recent floods, the foot-and-mouth outbreak and rising feed prices caused by bad weather in grain-growing areas such as Canada and parts of Europe. Farmers are warning that supermarkets must allow price rises or they will face bankruptcy.
Dairy farmers have experienced hard times, as the price they receive for milk has declined. This year, that situation has changed. Although price rises may be too late to save many dairy herds at smaller farms, the future of the industry is now far brighter. Chinese consumers are pushing up the price of dried skimmed milk. Supermarkets under investigation by the Competition Commission for their treatment of dairy farmers have been making a point of paying farmers a fairer price.
Talk of the £1 loaf has begun amid the surge in wheat prices. Around 8p is expected to be added to a standard 65p loaf as the price of flour doubles.