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29 August 2006

The cost of food

I am aware that when I write about food, I rarely refer to its financial cost.  I am lucky, I do not have to worry about whether I can afford my next meal - unless it's another Urasawa - but obviously, many are not as fortunate.  However, given the importance of this most fundamental purchase, its cost is vitally important.

Breakingviews (subscription req'd) carries an interesting article on the implications of food inflation.  According to the latest figures from the UK's Office of National Statistics (ONS), food prices in July 2006, were 3.2% higher than the same time a year earlier, whereas other goods were only 2.4% up.  Breakingviews suggests a couple of reasons for the increase - higher energy prices and the commoditisation of food stuffs (very Michael Pollan) - but notes that consumers have not been complaining.

The article makes no real attempt to suggest why they haven't complained but it does note:

The change in attitude [of accepting higher prices] could be the most significant shift. When inflation was under tight control, producers found that price pressure in one area had to be matched by cost reductions elsewhere. The willingness to accept higher prices is the first step in inflationary psychology. The next would be workers demanding higher wages to compensate. Steady increases in the price of food - which is vital and purchased frequently - would make that sort of demand more likely.

Therefore, we are likely to insist on higher wages so we can afford our loaf of bread.  But why aren't we getting worked-up that food is costing more?  My personal feeling is that although food costs more, food accounts for less as a percentage of the household budget than it has done previously.  It goes back to apathy.  Large swathes of the population don't care enough about how much food costs them, similar to their lack of interest in the quality of the food they are eating.  Those that do notice either cannot do anything about it because inflation means all food is getting more expensive or, they may be fooled into believing that by paying more, their food is better/healthier/more natural.

I am interested to know which food sectors have suffered the most from inflation.  According to the press release from the ONS, the reason for the increase can largely be attributed to:

  • Fruit, where prices for some items fell by less than a year ago, especially grapes, strawberries and peaches
  • Milk, cheese and eggs, where shop bought milk prices rose in July after price cuts earlier this year
  • Meat, where prices rose in July, especially for beef

However, each of these three categories cover a multitude of sins.  Are we talking organic beef or Tesco's Value range?  Or have prices risen in both groups but if so, is it by similar amounts?

I fall into the category of people who have not noticed the increases, but I am intrigued and want to know how food inflation is affecting me.  So, I am creating a basket of goods - the Silverbrow Prices Index (after the Retail Prices Index) - and will post about its fluctuations.  I will do this on a monthly basis so I can see in real-time, just how expensive our most fundamental purchase is becoming.  I haven't decided yet on its composition but it will reflect the type of food I buy and eat on a regular basis.  I'm sensing an opportunity for the foodosphere's perspective of Freakonomics.

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Interesting. Particularly the apathy part. I wonder, at least here in the ol' U.S., if part of that apathy is because people eat out so much, that people aren't really paying attention to what's happening on the grocers shelves. I know I've felt the cost increase--not five yeas ago my and the lady friend's grocery bill was about 80 dollars per week, now it's about 120. Our eating habits haven't changed. If we decided to go entirely organic, our bill would nearly double.

Looking forward to seeing how the prices fluctuate on your list. I have noticed a few things increase, but this is mainly in the smaller stores as Tesco, ASDA etc are all eating each other with competitive pricing, I guess this is why it is so easy to miss.

Try going to waitrose and then you will notice the prices a little more ;)

David
http://www.EatingBritain.com

David - You're right Waitrose is expensive. Although your point with competitive pricing holds true, it is also the case that the selection you get from the supermarkets is reducing. So consumers are paying less for a diminishing range of products.

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