Produce costing supermarkets almost 25% more, data shows

Sunday, 12 March 2023

Supplier costs are about two-thirds of supermarket retail prices, Infometrics says.

Cyclone Gabrielle is impacting the cost of food delivered to supermarkets in February, new data shows.

Infometrics’ latest grocery supplier cost index, which measures the cost of goods charged by suppliers to Foodstuffs supermarkets, showed a 10.4% increase last month, up from 10% year-on-year in January.

“As expected, supplier costs have accelerated again after the holding pattern over summer, as input costs across the supply chain continue to put pressure on producers,” said Infometrics principal economist and chief executive Brad Olsen.

He said there were some early signs of the impact of Cyclone Gabrielle, which affected farmers in the Gisborne and Hawke’s Bay region in particular.

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Produce costs were up nearly 23% year-on-year in February.

“Items like kūmara, leafy greens, and some stone fruits have been affected by the cyclone, and some of the early effects on supplier costs are becoming apparent.”

He said supplier costs were responsible for about two-thirds of the price that shoppers would pay.

“Domestic inflation pressures have not eased substantially yet, and weather-related disruptions will only reinforce some of the pressures already in the system, as supply is limited,” he said.

“Cost pressures remain broad-based, with a return to high levels of items increasing in cost in February 2023. Produce costs remain the most elevated on an annual basis, and frozen and grocery food cost increases accelerated again. Cost increases also continue to be experienced across a larger number of items, with over 8200 items increasing in cost in February 2023. More of these increases were of a larger magnitude too.”

Input cost pressures for producers remained intense, he said, with higher cost increases for core business requirements including freight, repairs and maintenance, and packaging recently.

He said these rising cost pressures highlighted the broad rises in operational costs being incurred by producers across the supply chain, driving further increases to supplier costs.

The Farm Expenses Price Index from Stats NZ shows on-farm costs rose 14.6% year-on-year in the December 2022 quarter, close to the record 15% recorded in September 2022.

Finance, fuel, and fertiliser cost increases continued to drive farm costs higher, with a 45%, 33%, and 28% per annum increase respectively for these major items. Farm price increases were running at a faster rate than consumer or general business inflation, at a near-record pace.

Global food prices increased slightly again in February 2023, with the trend in food prices remaining stable at higher levels.

The World Bank commodity price index showed that food prices rose 1% in February from the month before.

Considerably higher food prices in February 2022 due to the Russian invasion of Ukraine means that global food prices in February 2023 are 2.8% lower than a year ago, but still up 18% from February 2021.