Commodities Shuttle: Breakfast and ‘pf’ no longer fit in the consumer’s pocket

The cost of food no longer fits in the pockets of low-income families. After the successive highs of recent years, food prices will rise again strongly in 2022.

From January to April, the cost of food rose by 10%. In the last 12 months, the increase in prices was 17.8%, according to data released this Wednesday (4) by Fipe (Fundação Instituto de Pesquisas Econômicas).

The difficulties for consumers start right at breakfast. Powdered coffee costs 81% more than it did a year ago in supermarkets.

This pressure on drink prices has no end date. Drought and frost last year affected crop productivity this year. The harvest will be smaller than expected, and external demand remains heated.

If the consumer opts for a coffee with milk, the costs are even higher. The long-life type rose 12% just last month and accumulates 27% in 12 months.

Pastures affected by the weather, the very expensive cost of feeding cattle —due to the high grain prices—, and the departure of many producers from the activity have resulted in lower milk collection in recent months. The off-season, which is just beginning, is unlikely to provide cost relief for producers and consumers.

The weight in the pocket gets even greater if breakfast includes the bread. Adverse weather conditions in several of the main producing regions of the world, in addition to the effects of the war between Russia and Ukraine, made the international price of the cereal rise 43%, in dollar, in the last 12 months.

This pressure begins to reach the domestic market. Wheat flour rose 9% last month, and French bread, 4.2%. In the last 12 months, the bagel became 20% more expensive.

Brazil has increased its domestic production of wheat and, according to some estimates, the national harvest could reach 9 million tons, a volume, however, insufficient to cover the national demand of 12.8 million tons.

In addition, Brazilian wheat is well accepted in countries in Africa, the Middle East and Asia, taking Brazilian exports to record levels this year.

Butter and margarine costs are also spiraling out of control. Milk and vegetable oils, raw materials used in the products, make these two foods more expensive.

Price pressure is not restricted to breakfast. The so-called pf (cooked dish) has also gone up a notch. The bean crop was affected by the weather, and pulse prices rose 6.5% last month, accumulating 15.2% in the year.

Rice, which dropped from that high price level of 2021 earlier this year, has risen again. Last month, the increase was 2%.

At the end of the harvest, the harvest is delayed due to rains in Rio Grande do Sul, the largest national producer. In addition, the return of the dollar rate to a level above R$ 5 encourages exports.

The consumer will have to choose well if he wants a salad during lunch. Tomatoes cost 128% more than a year ago; cabbage, 96%; lettuce, 53%; and carrots, 91%. The potato, another option to complement lunch, costs 49% more, according to Fipe.

These are seasonal products, and prices should settle over the next few months. The return, however, can be slow. Vegetables, for example, are with average increases of 50% this year, accumulating 74% in 12 months.

Meat as a complement to lunch has to be well chosen. Chicken is on the rise. It rose 10.3% last month. Already the sirloin, after a sequence of highs in recent years, was 2% more expensive in April, but accumulates 21% in 12 months.

The high cost of meat production keeps protein prices high. In addition, external demand remains strong, and the country’s exports maintain a strong pace.

The option, among the meats, can be pork.

Prices have continued to fall and currently cost 9.5% less than a year ago, according to a Fipe retail survey.

Good for consumers, bad for producers. These braced for a long period of Chinese imports and increased production, but China has seen a rapid recovery of its herd, which had been affected by African swine fever in 2018.

The lower presence of the Chinese in the Brazilian market caused exports to decline, bringing down domestic pork prices. As long as production does not adapt to the new demand, prices should remain low.

One of the options is the traditional fried egg, but this one has also been registering high prices. In the first four months of this year alone, the increase was 18%.

The cost pressure is not just restricted to food, but also to the means of preparation. Soybean oil, after record highs in recent years, has increased by 35% from May 2021 to the end of last April.

Higher soybean prices and reduced supplies of sunflower oil from Ukraine and palm oil from Indonesia will support vegetable oil prices.

On top of all the food costs, consumers are paying 35% more for cooking gas. In the first four months of this year, the high was 12%, according to Fipe.