Why is our food so expensive and what can we do about it?
Wednesday, 19 April 2023
Lately, when Stats NZ has released its Food Price Index, it has confirmed what we already know – food is getting more and more expensive.
Food prices increased by 12.1% annually in March, the highest annual rate of increase seen since 1989.
Fruit and vegetables were up 22.2% while grocery food prices were pushed higher by the increasing price of barn or cage-raised eggs, potato chips, and a six-pack of yoghurt.
The funny thing is New Zealand produces enough food to feed 40 million people a year. So why are our food prices so expensive?
Inflation
At the moment, a lot of it is down to inflation, and we’re not the only country suffering.
**READ MORE:
* Cheat Sheet: What is a national food plan, and how would it help our food security?
* Clear justification for change in grocery sector - Commerce and Consumer Affairs Minister
* Foodstuffs says supermarket prices fair and competition strong
**
Data shows annual food inflation across all OECD countries was running at an average of 15.2% in January 2023.
In the UK, food prices jumped18.2% through the year to February - the sharpest rise since the late 1970s.
Recent weather events in New Zealand destroyed and damaged many crops in the Far North and down the east coast of the North Island, which put pressure on already high prices of fresh produce.
Foodstuffs managing director Chris Quin said, last month, the average product cost increase from suppliers to the Foodstuffs co-operative on the same products measured in the FPI basket was 12.8%.
But Eat New Zealand chief executive Angela Clifford said suppliers were growing increasingly frustrated with supermarkets, and suppliers claimed the supermarkets were hiking up the retail price.
She said she had had a handful of suppliers call her to vent their frustrations at the duopoly.
Lack of competition
The duopoly managed to survive the Commerce Commission’s market study on supermarkets without incurring any of the more drastic solutions initially proposed.
The commission estimated Countdown-owner Woolworths NZ and Foodstuffs, which owns the Pak ’n Save, New World and Four Square brands, were making about $430 million a year in excess profits.
Chief executive of the New Zealand Food and Grocery Council Raewyn Bleakley said there were some glimpses of tension in the market after the Government enabled independent retailers to access the main retailers’ wholesale products.
Online retailer Supie was aggressively competing with the major retailers, The Warehouse now offered grocery items, and Chemist Warehouse and others offered more choice on a range of non-food items, she said.
Exporting
We export a lot of food – roughly about $16 billion of dairy, $3.7b of beef and $3.9b of sheep meat a year.
As a result, global markets set the price in New Zealand, to make it profitable for local producers to sell their foods domestically.
Export prices have been blamed for setting red meat prices in New Zealand, with prices rising between 12% and 31% in the last decade, although meat, poultry, and fish prices fell 1% from March 2022 to March 2023.
”As our exports, particularly dairy products and meat, fetch higher prices the pressure goes on what New Zealanders have to pay for them,” Bleakley said.
“This is because the price of the raw materials is the same at the farm gate, no matter where they are being sold. So, we pay a price that matches what the overseas market would deliver to our exporters.”
Our location
Being all the way at the bottom of the world has its perks, but it also affects our food prices.
Because we are a long way away from most other countries the cost of importing products is high, and as the price of oil increased, so did prices.
A supply shortage of ships and containers worldwide due to consumer demand since the pandemic began had driven up freight costs, with the cost of shipping goods to New Zealand increased by 500% in 2022.
So when will these price pressures ease?
Hopefully things would ease over time, Bleakley said.
“A third big retailer introducing competition, an easing of the supply chain problems, and a halt to the war in Ukraine, which has pushed up prices of wheat (flour) and cooking oils, and a continued easing of global freight costs would all combine to make a difference.”
But Eat New Zealand chief executive Angela Clifford said if consumers wanted change they needed to shop elsewhere.
A recent survey done throughout the country conducted by Farmers’ Markets New Zealand (FMNZ) revealed that buying fresh food directly from the grower or producer costs less than buying the same basket of goods from the supermarket.
There was up to an 18% saving by shopping at farmers markets. At the Southern Farmers Market in Invercargill that amounted to a saving of $50.
And what can we do about it in the long term?
There have been calls from food organisations such as Eat, Aotearoa Food Rescue Alliance (AFRA) and Kore Hiakai Zero Hunger Collective to introduce a national food plan to the country.
A national food plan is a policy that would guide food-related decisions and actions in the country.
Many first-world countries have some plan or policy in place to manage their food. Australia committed to its national food plan in 2010, with goals to achieve by 2025.
The Ministry for Primary Industries was working on a Food and Beverage Industry Transformation Plan, which aimed to support the food and beverage sector by enhancing the country’s traditional foods and scaling up emerging foods.
It would do this through four “transformations”: moving the sector towards consumers and the market, increasing investment in innovation and attracting capital for growth, building capability to innovate, commercialise, and improve productive capacity and regulatory settings enabling food innovation.