POLITICS & INSTITUTIONS - ECONOMY

Forecast

Food prices to rise in 2023 … but less



Inflation on food products should rise to 4-5% in 2023 according to Statec. (Photo: Romain Gamba/Maison Moderne/Archives)

Inflation on food products should rise to 4-5% in 2023 according to Statec. (Photo: Romain Gamba/Maison Moderne/Archives)

After rising by 10.9% year-on-year in October, food prices should continue to rise in 2023, but at a rate of 4-5%, predicts Statec. However, the statistics institute does not yet see the end of the road in sight.

Food prices rose by 1.7% in October 2022. This is the highest monthly increase since October 2007, according to Statec. Compared to the same period last year, the cost of food has risen by 10.9%.

Milk, butter, bread, pasta, vegetables … all everyday products are affected. But how high can their prices go?

“We don’t expect a fall” by the end of 2023, warned Tom Haas, head of the modelling and forecasting unit at the statistics institute, “but a slowdown in inflation. The rate should be halved to around 4-5%.”

When will they finally come down, if at all? “I can’t say. We only forecast for the current year and the year after.” Nor could the economist detail which foods will see their prices rise more than others. “We look at thousands of products and there are always some that go up and some that go down. There are seasonal effects for many of them.”

Three main causes

Haas cited three main causes for the rising cost of food. “There was a drought problem in Europe. Wheat that couldn’t leave Ukraine for several months. And the cost of energy which has an impact, on machinery, but also fertilisers, made from petrochemicals.” The first, “seasonal, is less of a factor.” As for the second, “there are once again ships transporting wheat from Ukraine.” And then “energy prices are reaching a ceiling.” These ar three reasons why inflation is likely to calm down, according to him.

This was confirmed by Guy Feyder, president of the Chamber of Agriculture. He has already noticed a certain stability on the markets, even if we are still at levels “much higher than what we have known.”

However, there are differences depending on the product. For cereals, the explanation comes from the war in Ukraine. Even if the country exports “rather to Africa, regardless of the location, this affects the world market,” via the classic mechanisms of supply and demand, he explained. Similarly, the price of butter is “driven by strong international demand.” The cost of pork meat has risen less than the others, perhaps due to an “oversupply with the development of the sector” following African swine fever.

The strategy of supermarkets

Faced with the increases, are supermarkets changing their strategy? Many of them have already lowered their margins to keep their prices competitive.

“We are trying as much as possible to boost the purchasing power of our customers through various actions: the reduced prices of our more than 400 products, the 10% discount of our loyalty programme on fresh products with the Nutri-Score A&B after €99 of purchase the previous month…,” Delhaize detailed.

“We are trying to find the right balance between passing on the increases from our commodity and energy suppliers, our desire to continue to offer our customers attractive prices, maintain our jobs and ensure the company’s sustainability,” added Auchan. The company mentioned its “Essentiel” brand for small budgets.

In any case, these elements are not taken into account by Statec, and for a good reason. “We don’t know their purchase prices or their costs, we can’t estimate their margins.”

This story was first published in French on Paperjam. It has been translated and edited for Delano.