FOOD -EUROPEAN- FONT : MASTER GLOBAL ESSAY

Food prices in Europe escalate. But why? Basic items remain costly even as agricultural and energy expenses decline.

It is the most basic of staple food items : sliced white bread. In Britain, the average price of leaf was 28 percent higher in April, at 1.39 pounds, or $1.72, than it was a year earlier.

In Italy, the price of spaghetti and other pasta, a fixture of the Italian diet, has risen nearly 17 percent from the year before.

In Germany, the European Union's largest economy, cheese prices are nearly 40 percent higher than a year ago, and potatoes cost 14 percent more.

Throughout the European Union, consumer food prices were on average nearly 17 percent higher in April than a year earlier, a slight slowdown from the previous month, which set the fastest pace of growth in over two and a half decades.

The situation is worse in Britain than in its Western European neighbors : Food and nonalcoholic drink prices were 19 percent higher, the quickest pace of annual food inflation in more than 45 years.

By comparison, the annual rate of U.S. food inflation was 7.7 percent.

Persistent food inflation is squeezing low-income households and troubling European politicians. [ In Italy, the government held a meeting last month to discuss soaring pasta prices.]

At the same time, the major costs that go into making food products, including fuel, wheat and other agricultural commodities, have been falling in international markets for much of the past year - raising questions about why food prices for consumers remain so high in Europe.

And with rising labor costs and the possibility of profiteering, food prices are unlikely to come down anytime soon. More broadly, rising prices could also put pressure on central banks to keep interest rates high, potentially restraining economic growth.

Behind the sticker price for a loaf of bread includes the costs for not only key ingredients but also processing, packaging, transport, wages, storage and company markups.

A United Nations index of food commodity food prices, such as wheat, meat and vegetable oil, peaked in March 2022, immediately after Russia's invasion of Ukraine, which is one of the largest grain producers.

The war disrupted grain and oil production in the region and had global impact, too, worsening the food crisis in parts of East Africa and the Middle East.

But the worst was avoided, in part because of a deal to export from Ukraine. European wheat prices have declined about 40 percent since May last year. Global vegetable prices are down about 50 percent. 

But there is still a ways to go : The United Nations food price index was 34 percent higher in April than its 2019 average.

Aside from commodity prices, Europe has experienced particularly harsh increase in costs along the food supply chain.

Energy prices soared because the war forced Europe to rapidly replace Russian gas with new supplies, pushing up the costs of food production, transport and storage.

Though wholesale energy prices have fallen back down recently, retailers warn that there's a long lag - perhaps up to a year - before consumers will see the benefits of that because energy contracts were made months before, most likely reflecting those higher prices.

And the tight labor markets in Europe with high job vacancy rates and low levels of unemployment are forcing employers, including food companies, to push up wages to attract workers.

This in turn drives up costs for businesses, including in the food sector.

The Essay continues. The World Students Society thanks author Eshe Nelson.