Why are food prices rising so rapidly?

9:56am Wednesday 16th April 2008

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STEPHEN LEWIS looks at the impact soaring food prices are having on local families.

RISING food prices have added more than £400 to an average family's annual grocery bill in the past year.

A white sliced loaf has gone up by an average of 5p to 59p since a year ago, according to price comparison website mySupermarket - a rise of almost ten per cent.

There have been big rises too in the prices of many other staples. Eggs are 40 per cent more expensive than a year ago (up from £1.75 to £2.45 for 12 free range eggs), butter is 60 per cent dearer (up from 58p to 94p for 250g), cheese is a quarter more expensive (up from £1.21 to £1.52 for 250g of cheddar), while the price of beef has risen by ten per cent.

Even milk has risen by nearly 17 per cent, from £1.68 for six pints of semi-skinned a year ago to £1.96 today.

Overall, according to mySupermarket, food prices based on a basket of 24 staple foods from major supermarkets are 11 per cent up on last year - an increase of £400 a year for a family spending £70 a week on food.

There are several reasons for the increase, analysts say. The continued growth in world population - expected to top nine billion by the middle of the century - creates greater demand.

The impact of using crops for biofuel is helping to increase cereal shortages - while changing diets in China and other parts of Asia are also affecting food prices. As they get richer, people in these countries are eating more meat and dairy products. That pushes up the price of meat and milk - but also adds to pressure on cereals, because cattle and other livestock need to eat grain.

As a result, the world price of wheat has doubled in a year - and other cereal crops, such as rice, have also increased sharply. Meat is also more expensive, because of the increased cost of feed.

Combined with soaring fuel costs and the credit squeeze, rising food bills are another reason for many families to have to tighten their belts.

The family

KIMBERLEY Grayson has certainly noticed the rise in the cost of food. The 23-year-old mum-of-two, from Clifton Moor, York, reckons she spends £70 to £80 a week on food for herself, partner Paul Harvey, and two children, Olivia, three, and Summer, one.

Kimberley, pictured, an NHS domestic assistant, has seen the cost of that weekly shop rise sharply in recent weeks.

"Orange juice has gone up, bread has gone up, milk has gone up," she said. "Paul used to have tuna in his pack-up, but not any more because it is too expensive. It's Tesco value chicken now. You have to cut back and eat what you can.

"We normally shop at Tesco, but it is too expensive just to do the full weekly shop there now. You have to shop around, looking for bargains. I'll tend to spend about £30 in Tesco now, then go elsewhere to cheaper places such as Netto, and York market."

The steadily rising cost of food is a worry, Kimberley admits. She likes to cook proper, healthy meals for her family - but organic fruit and veg, and leaner cuts of meat, are becoming too expensive.

Both she and Paul, a landscape gardener, work, she says. "But we still don't really have enough to spend."

It is not only families who are suffering.

Chris Todhunter, who lives in Selby and works for City of York Council, has been on her own since the children left home.

She has really noticed the increasing cost of food. "You go to the supermarket checkout, and it is £7 to £8 more than you expect it to be. And it is ordinary things that are going up, not luxury goods. Wages haven't gone up to meet it."

The farmers

FARMERS might be expected to benefit from rising food prices. Well, yes and no, says Rachael Gillbanks, of the York-based North East branch of the National Farmers' Union.

For too long, consumers have been enjoying unrealistically and unsustainably cheap food, she said. What is happening now is part of a "long overdue readjustment".

Even so, not all farmers are celebrating.

Dairy farmers are benefiting from a higher milk price, but for so long they have been making a loss. "They were losing money hand over fist - at one point losing 4p for every litre of milk they produced."

Dairy farmers, in common with other farmers, were also having to cope with soaring fuel costs - and new environmental regulations imposed by the Government.

Cereal farmers are not seeing much benefit from the increased prices, because these are largely offset by the soaring cost of fertiliser, Rachael said. Yorkshire pig and poultry farmers, meanwhile, have been badly hit by the "devastating impact" of big rises in the price of feed.

Feed costs amount to between 40 and 55 per cent of the cost of producing poultry and pork, the NFU says - so the high cost of grain (and hence feed) is hitting them particularly hard. Only last month, pig farmers from the region joined a protest in London to highlight what they described as a "crisis" in the industry.

The restaurant

THE recent budget hikes in alcohol prices have hit restaurants harder than rising food costs, says Meltons owner Michael Hjort, of the York Hospitality Association.

Often at restaurants and tea-shops, he says, the cost of food ingredients is not the biggest factor.

"In a tea shop, for example, the cost of flour for making scones is relatively minimal. It is about value added - the trouble taken in making them."

Nevertheless, the rising costs of meat may force some mid-price restaurants to be more selective in the cuts they buy - and more creative in the way they use them.

It has happened before with fish, he points out.

Some of the more expensive fish have all but disappeared from mid-range restaurants. "How often these days do you see people serving turbot and Dover sole?"