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04.06.2008Take the bite out of rising food prices

Global food prices are on the rise at unprecedented levels. Meanwhile we continue to shop in ways that reflect lifestyle more than budget. How can Australians reduce their bills at the checkout?


By Marian Edmunds

Do you study the supermarket leaflets for bargains then shop at a convenience store every day? Australians’ shopping habits are influenced heavily by lifestyle but the global hike in food prices is starting to bite us.

Food prices have been rising globally at a level so concerning that aid agencies are warning of famine casting a wider swathe across the planet. The UN reported that food prices rose 35 per cent in the year to January. And according to the UN Food and Agriculture Organisation's world food index, global dairy prices rose nearly 80 per cent and grain by 42 per cent in 2007.

Price rises have not been so pronounced within Australia but with big demands on our exports we may start to feel the pressure more.

In January the Australian Competition and Consumer Commission (ACCC) ordered a six-month inquiry into the nation's grocery prices to identify anti-competitive structures within the industry. The big supermarket groups, small retailers, consumer groups and food growers have all submitted papers to the inquiry.

In the first quarter of 2008, the Australian Bureau of Statistics’ Consumer Price Food Index increased by 2.1 per cent on the previous quarter, almost double the 1.3 per cent rate of general inflation.

The food price index is up 5.7 per cent on last year’s levels and up 11 per cent from two years ago.

Vigorous food price inflation may continue for several months for vegetables, dairy, meat, bread and cereals and restaurant and takeaway meals, says Rabobank Food and Agribusiness Research senior analyst Tim Hunt. The most significant rises have been in dairy and poultry, says Hunt.

Milk prices rose 2.4 percent in the last quarter and 11.6 per cent in the past year and cheese prices rose 3.4 per cent and 15 per cent over the year. Poultry rose 4.9 per cent on the previous quarter and 11.6 per cent over the past year. Bread and vegetable prices also rose significantly.

There are three causes, says Hunt. They are rising international commodity prices, local product shortages largely brought about by the drought, and rising production costs due to increases in feed grain, fertiliser and water.

The cost of raw food ingredients in the products we eat is important too but it’s not the only cost, and in some cases not even the main cost, says Hunt. Food processors, distributors and retailers are facing rising costs on almost every front and are passing them on, at least partly to consumers, he says.

Were it not for the strength of the Australian dollar softening price pressure on imports and exports, the price rises may have been even greater, says Hunt.

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