Four questions to understand the increase in food prices – Economy

Why are prices skyrocketing?

It is a combination of several factors: energy and fuel are more expensive, as is the production of many processed food products. The processing of sugar beet or the drying of powdered milk, for example, have seen their production costs skyrocket due to the price of energy.

Agricultural raw materials, in particular cereals, soybeans that feed certain animals, durum wheat that forms pasta, corn, have also soared, both for fear of shortages due to Russia’s invasion of Ukraine as well as the reluctance of some producing countries to export and some harvests are not good.

Other spending items have increased: large imports, with the price of containers; but also packaging, cardboard, aluminium, glass… Sometimes it is necessary to change suppliers from one week to another, and not always under the same contractual conditions. The head of the dairy giant Lactalis, Emmanuel Besnier, spoke to AFP of “a crisis in all production costs”, which are expected to increase by 15% in 2022.

Even when ?

This explosive cocktail seems destined to last for at least several months. Emily Mayer, an expert in consumer goods at the IRI institute, foresees an inflation of 5% “in early summer”, she explains to AFP, and a phenomenon that “will settle”. In April she already registers an increase of 2.9% compared to the same month of the previous year, after 1.5% in March. In Le Parisien, the president of the Système U supermarkets, Dominique Schelcher, cited the example of Spain or Germany to estimate that inflation could rise to 10%, “due, in particular, to the cost of energy.”

The latter does not seem to be going down. And manufacturers and big retailers have been strongly encouraged by the government to come back to the negotiating table, the former considering that the annual negotiations, concluded on March 1, have not sufficiently taken into account increases in production costs. . If at the end of the negotiations the distributors bought more expensive agro-industrial products, the prices would not drop again on the shelves before the summer.

What response from supermarkets?

In this context of fear for purchasing power (the first concern of the French according to opinion polls), brands minimize price increases with one goal: to maintain, even win, new customers, who are increasingly attentive to their receipt.

With the support of communication plans, they also work on what the sector specialist Olivier Dauvers calls their “price image”, that is, the perception that customers have of their prices. Michel-Edouard Leclerc thus announced an “anti-inflation shield”, to compensate in vouchers in E.Leclerc stores for price increases from May 4 on a selection of 120 consumer products.

The brands whose “price image” is better, E.Leclerc, Lidl or Aldi in particular, are also those whose economic performance is better. But the competition, obviously concerned about its price image as well, is also trying to “smash prices” and make it known.

What can the government do?

If, on the one hand, the Minister for Agriculture, Julien Denormandie, advocated reopening discussions on the prices of agri-food products in mid-March, the Government, on the other hand, is well aware of the problems posed by the rise in prices. food for many French households. It has already decided on costly measures to help households and businesses, in particular the freezing of the price of gas (cost of 6.4 billion euros according to the latest estimate in mid-March), compensation for inflation for the most modest (3.8 billion euros euros), a discount of 15 cents on fuel (3 billion).

But during the campaign, Emmanuel Macron promised to go further, in particular through a food check, aid for people who use their car a lot to work or an increase in social minimums and retirement pensions. With AFP, the Familles Rurales consumer association had requested that the food check cover “products that are valued in the national health and nutrition plan.”

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