Belfast Telegraph

Inflation giving us food for thought

By Claire McNeilly

You nip out for a few groceries and suddenly you've blown £30 on items that barely fill two carrier bags...

Unfortunately, we're all too familiar with spiralling food bills – but why does it cost so much?

Unfavourable weather is a major force driving up prices for certain commodities like sugar or wheat, but brisk demand is also an important factor underpinning maize, dairy and oil prices.

Right now, a specific combination of bad weather, political conflict and increased consumption is hiking the price of everything from cocoa to pork.

Wheat prices spiked 80% when Russia was hit by drought and political uncertainties in 2010 sparking fears that the current crisis could trigger a similar rise.

That's because the cost of wheat is vulnerable to the current instability in Ukraine, a key grain producer.

If, for example, sanctions stop the Russians from exporting wheat and grains, or if the Russians choose to stop exporting, then wheat prices will inevitably go up.

Elsewhere, Arabica coffee is up 53%, partly because of unseasonably dry weather in Brazil, while pork prices are up 5%, due to the horse meat scandal and a virus epidemic among US pigs.

And the Russians and Chinese are putting heavy demand on dairy products and milk products, keeping prices high.

Alas, there's more unappetising food for thought: new research from specialist Prestige Purchasing suggests that our grocery bills will rise further still as food inflation hits 3.8% before the end of 2014.

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