An agreement like the one that the French Government has reached with the country’s distributors so that they reduce their margins in a basket of food that they choose throughout the quarter would give oxygen to the pocket of the Spanish consumer until springwhen it is expected that there will be a notable relief in the rise of these basic products in our country, among other things due to the so-called base effect – which in the case of energy could begin to be visible as early as this month of March.
The inflation rate for food and non-alcoholic beverages stood at 15.4% in January, the last month for which there are disaggregated data. These They had just risen to 15.7% per year in Decemberat the highest level since the beginning of the series prepared by the National Institute of Statistics and which dates back to 1994. The war in Ukraine, its impact on fertilizers, the ‘rally’ in energy, transport prices and The prolonged drought that has affected Europe has translated into a notable increase in food prices practically in the last year.
In fact, taking into account the data from the INE, the increase in food prices reached double digits in April of last year (10.1%) and has been accelerating since then up to that unprecedented rate of 15.7% in December, with a month of mild moderation in between. Food is the goods in which all these factors have an impact in a more marked way and, in addition, there is the fact that its price began to become more expensive later. There is also the fact, according to sources consulted, that energy costs have a greater influence on the final part of the chain (in distribution) than on prices at source (in agriculture).
The world price of agricultural raw materials, key
There is also a traditional twelve-month correlation between the S&P GSCI Spot Index for agricultural commodities and the Spanish CPI of food and beverages, according to the economist Juan Ignacio Crespo. This lag, he points out, “should mean that the drop in food prices does not really begin to be noticed until May.” Hence, a measure like the French one gave consumers some leeway while shopping basket prices continue to rise strongly.
This notable delay in the impact of the rise in international prices on the food sub-index in Spain occurs both when there are rises and when there are falls. Thus, between January 2021 and May 2022, Crespo explains, while the price of agricultural raw materials shot up 65%, the Spanish sub-index of food and non-alcoholic beverages increased around 12%.
Last week, the Minister of Agriculture, Fisheries and Food, Luis Planas, indicated that there are objective reasons to expect a gradual decrease in food prices in the coming months due to the reduction in the main production costs. The indicators suggest that “food prices may have peaked,” Planas said. Meanwhile, the main opposition party, the PP, has brought before Congress a bill with its proposals to address this issue. It includes, among others, an extension of the VAT reduction that the Government approved in January for meat, fish or preserves, aid to the sector, modifying the waste law or strengthening the negotiating position of agricultural producers.
The great distribution would not see with good eyes a pact to the gala
At the moment, the agreement in France is not viewed favorably by everyone. Sources from the large distribution sector consulted by ‘La Información’ are skeptical that a pact similar to that of France is reached in Spain. In this sense, they have recalled that a similar measure was already promoted in the neighboring country during the government of Nicolas Sarkozy in 2011 under the name of ‘the basket of essentials’. On this occasion, it was more of a recommendation than a rule, although those “price freezes were made at the cost of lowering quality.” Which, in his opinion, may mean future damage to the reputation of the sector “when consumers perceive it as the French did”.
On the other hand, they have also called the agreement “discriminatory”. “It does not reach all distributors or consumers,” they have pointed out. For this reason, they have asked What will happen to families that do not have a large area or distributor nearby?, for example, in rural areas where small establishments abound. “Don’t they have the right to benefit from the measures?” they wonder. The sources consulted recall that the Food Chain Law, whose latest reform dates from the end of 2021, obliges them to “accept increases from suppliers that are based on objective cost increases.”
In addition, they are questioned about who will bear the costs, if the prices of various products are frozen. “The distributor that is the one with the least margin has? Will the producers and manufacturers also be part of this effort?”, they reproach from the sector. Thus, they recall the message from the Minister of Agriculture, a few days ago asking for efforts to contain price increases. A message that, they believe, is addressed to all the actors in the agri-food chain and that does not only focus on distribution.
The ‘yes’ of consumer associations
The consumer associations do consider the measure “positive”. From the OCU they see fundamental that the selected products are those that have a significant weight in the shopping basket of an average family and that the price reduction, as well as its maintenance, “be real”. In addition, they consider that the impact that the measure may have on the price of other products must be monitored. In any case, remember that it is a voluntary agreement, where each chain decides what type of products it incorporates. “In Spain, attempts at a limited basket (to 30 products) have barely had an effect and there are still no concrete proposals on the table on food price containment,” they settle.
