Food prices Hattie Ellis The high cost of food is making headlines the world over. Find out what factors lie behind the price rises.

In this article

Which foods are affected? Why are food prices rising so much? What has happened recently?

What are supermarkets doing? What about the recession?

The bigger picture What can consumers do?

Food prices have soared over the last two years and as the recession bites deeper, consumers are reacting to hard times by bargain-hunting. What’s behind the ups and downs in the cost of a weekly shop and which way will prices head next?

Prices for grain, as well as meat and dairy produce (which are both dependent on grain through animal feed), have gone up the most over the last two years. According to the February 2009 figures on the mySupermarket website, which tracks the cost of UK supermarket food, in the previous 12 months, the cost of cheddar cheese went up by 16 per cent, bread by up to 27 per cent, milk by nearly 15 per cent and beef mince by nearly 50 per cent.

These prices compare with price rises of 25 per cent for cheese, 20 per cent for a loaf of bread, 16 per cent for milk and 17 per cent for mince between spring 2007 and spring 2008. After steep increases, however, price rises for food have been slowing.

Meat and dairy produce depend heavily on grain

Many reasons lie behind food price hikes. One underlying factor is demand. The world’s population has soared to 6 billion (and is predicted to rise to 9 billion over the next 40 years), which puts pressure on supplies. And as countries such as China and India become more wealthy, people eat more, and especially more meat and dairy products. Meat and dairy produce depend heavily on grain; it takes eight kilograms of grain to produce a single kilogram of beef.

The role of oil and climate

The price of oil also plays an important part. Oil prices rose by about 400 per cent between 2001 and 2008. Modern intensive agriculture and food production depend on oil, and not just for transportation. It’s part of the cost of refrigeration, manufacturing and fertiliser. And as a result of fears about oil and global warming, there is a push towards growing biofuels, taking land out of production for food plants.

Then there are the ups and downs of harvests; some scientists believe that harvests are becoming more unpredictable as a result of global warming. Another theory about the underlying reasons for the sudden increase in food prices in 2007 and 2008, which caused riots in the streets in developing countries, was that it was partly because of speculation on the commodity markets as investors moved capital out of property when property prices began their dramatic fall.

The wheat price is only 10 per cent of the price of bread

The cost of oil has gone down since its high of £139 a barrel in June 2008, but sterling has also fallen drastically, by around 25 per cent against the euro in the second half of 2008. Because Britain imports around 40 per cent of its food, the fall in oil prices has been offset by the poor exchange rate. This is likely to be the main reason why food prices have stayed high despite good world harvests in 2008, according to Tom Hind, Head of Economic and International Affairs at the National Farmers’ Union (NFU). “The wheat price is only 10 per cent of the price of bread,” he explains. “There’s also the cost of manufacturing, energy and the retail off-take.”

Supermarkets are reacting to the recession by offering promotions for shoppers and playing up their discounts as consumers trade downwards. “By taking advantage of these deals and downshifting to cheaper like-for-like alternatives, we know it is possible to save around 20 per cent on a typical weekly shop, which beats the year-on-year food inflation," says Jonny Steel, spokesperson for mySupermarket.co.uk. There are bargains to be had on basic goods, for those prepared to shop around.

According to a report, Food Shopping in a Recession, published in February 2009 by IGD, an independent organisation representing grocery distributors, the proportion of shoppers buying organic food dropped by five per cent in the previous year. The number of people buying Fairtrade, local and animal welfare products, however, had continued to rise, as had shoppers’ preference for products with fewer food miles.

Looking in the longer term, organic farming does not use oil-expensive fertiliser, and grass-fed beef is not reliant on increasingly costly grains. Prices of such food should, in theory, rise less in comparison to conventional foods.

Are the price rises just a product of several circumstances coming together at once, and will price cuts now keep the cost of shopping down? Many commentators believe not, and believe that there are long-term pressures of food supplies. Some see the recession and price rise crisis as an opportunity to address some of the fundamental issues at the heart of the way we produce and buy food. Tim Lang, professor of food policy at London’s City University, thinks we need to reassess how we buy, sell and eat food, including the way we eat meat. ‘There’s no simple fix,” he says. “We’re going to have to think about what’s good for the planet and what’s good for our bodily health.”

Dr Tom Macmillan, director of the Food Ethics Council says: “In the long run, if anything is going to keep prices higher than they have been over the last few decades it is likely to be resource scarcity - water, land and so on - and eating ‘green’ is about using less and being more careful with resources - and that can go hand in hand with higher animal welfare.”

British consumers throw away a third of the food bought, so one part of the solution, alongside bargain-hunting in the shops, is to cut back on waste. There are also arguments for eating less but better-quality meat, so saving money, promoting animal welfare and encouraging a more economical use of the world’s grain supplies.

And, as ever, cooking at home is by far the cheapest way of eating and is part of the shift towards thrift as British households tighten their belts.

Updated February 2009