In April, the price of a loaf of plain white bread in the U.K. was 28 percent higher than a year before. In Germany, cheese costs 40 percent more and potatoes 14 percent.
Italy’s pasta prices jumped 17 percent in April, year on year, and the government held a crisis meeting last month to figure out what to do about it.
Across the European Union, food prices overall gained 17 percent over the 12-month span. In the U.K., the cost shot up 19 percent.
During the same April-to-April period, food inflation in the U.S. was less than half that of Europe, at 7.7 percent.
Food prices remain stubbornly high in Europe compared to many other parts of the world not only because raw commodity prices are still elevated in the wake of the COVID War, the Ukraine quagmire, and Western sanctions on Russia.
“Aside from commodity prices, Europe has experienced particularly harsh increases in costs along the food supply chain,” The New York Times noted.
First, energy prices soared in the wake of Russia’s invasion of Ukraine. Although costs of oil and natural gas have fallen since, utilities and other users signed long-term contracts to lock in supplies. Some of those contracts, which lock in high prices, have a year or more still to run.
Second, the region’s tight jobs market has forced food processors to lift wages to lure and keep workers.
Third, there is growing evidence that “greedflation” has affected retail food prices.
The term describes corporations that use inflation as a cover to hike prices more than their costs increase. The pad protects operating margins and profits at the expense of consumers, as we reported in “Greedflation Fuels Inflation” (30 May 2023).
Last year, strong corporate profits contributed as much to overall inflation as wage growth, the European Central Bank has said, although it did not allege that businesses had made “excess” profits.
Some European governments are capping prices on food staples. The French government is asking grocery stores to cut retail prices on many items and pressuring food processors to join in creating an “anti-inflation quarter”—and threatening them with tax penalties if they are seen as protecting their margins at consumers’ expense.
TREND FORECAST: Before the Ukraine war, Europe had been a major buyer of Ukrainian grains and vegetable oils. The war’s destruction of Ukraine’s ability to grow and ship food, and Western sanctions on Russia have been key causes of food inflation across the continent. Indeed, President Joe Biden’s proclamation that the sanctions would “punish Putin” have, by the facts, only punished the working people.
With many countries bidding for other countries’ farm products, replacements for Ukraine’s missing exports will keep prices lofty, especially with droughts and other weather extremes plaguing key farming regions of the world.
Food prices will not move back toward pre-COVID War levels until Ukraine can return to regular agricultural harvests and shipments… which, until there is peace, will be years away.