“The paradox of high food prices is that while the cost of their production has been falling globally for a year, prices on the shelf are increasing,” says the president of the Piraeus Chamber of Commerce and Industry, Vassilis Korkidis, in an article in APE-MBE , who explains three reasons why food is expensive

The full article follows

“The successive crises in the world economy have caused distortions and upheavals, creating disruptive features that are difficult to explain with what we know so far. The only thing that is certain is that while food prices continue to rise from everywhere and since they did not decrease with fuel prices at low levels, it is not predicted to happen soon. Any correction for high food prices, domestic and imported, indicates the need for further improvement in the structure of production, but also in wage and price competitiveness.

Food prices in Greece and all 27 EU countries remain high and record higher monthly increases than the prices of other product groups, contributing more to European inflation.

According to Eurostat’s preliminary data, the decrease in inflation in Greece in March to 5.4% on an annual basis, from 6.5% in February is due to the decrease in energy prices by 14.7%, while on the contrary food prices, of alcohol and tobacco continued to rise at a double-digit rate of 11.8% versus a 12.2% increase in February.

Correspondingly in eurozone countries, inflation eased to 6.9% from 8.5%, with the deceleration also due to energy prices, which fell 0.9% compared to a 13.7% increase in February, while prices in food, alcohol and tobacco continued to grow at a faster rate of 15.4% compared to 15% in February.

At the same time, OPEC, worried by the continued drop in oil prices, compared to last year when oil was much cheaper for industrialized countries, decided to reduce oil production, causing a rise in fuel prices and dispersing inflationary trends across the market. Analysts estimate that the reduction will drive the price of a barrel closer to $100 with the scenarios for the effects on inflation and interest rates to keep it on the rise. In essence the biggest risk is entering a never-ending spiral where feedback inflation, via fuel and already high food inflation, will likely lead to more aggressive rate hikes to contain it.

For Hellas the developments in the oil sector come at a time when inflation in March, according to ELSTAT, follows a downward trend with fuel prices in fact to have contributed to the absorption of inflationary pressures which, however, continue in food. The risk from the barrel launch is twofold, as on the one hand the increase in the prices of gasoline and oil at the pump will probably lead to an increase in the cost of handling products and raw materials and on the other hand it will change the data in the price of energy. The new data therefore increase concerns in the economic field.

The possibility of further disturbing the balance of supply and demand in food consumer products is visible and the effects of the spiral created by fuel prices, makes it impossible to determine in time the duration of the high consumer price index of food in Greece and Europe.

The upward trend in retail food prices in Greece and the Eurozone has various explanations.

– In principle, according to IMF estimates, international prices increased by six percentage points in retail prices of food in 2022, explaining a large part of the increases.

– Second, there is a significant time lag in the passage of increases or decreases in international retail prices, estimated at 6 to 12 months.

– Thirdly, domestic prices are significantly affected by the nature of the production of agricultural products.

The IMF study on fertilizer prices is typical, showing that any change in their prices directly affects the international prices of grains and other basic goods on an annual basis.

The pan-European paradox of increasing and maintaining high prices in the food sector is expected to plague us for as long as the Russian-Ukrainian warin the courtyard of Europe.