Let 'em eat banknotes: British food prices soar

Fastest Rise in Food Prices in 14 Years

By Harry Wallop
The Telegraph, London
Tuesday, November 13, 2007

http://www.telegraph.co.uk/news/main.jhtml;jsessionid=2U3VCEFDE1WZBQFIQM...

Food prices are increasing at their highest rate for more than a decade, official figures showed yesterday.

Increased wheat, dairy, meat, and vegetable prices mean food factories are having to pay 6 per cent more for their raw ingredients than a year ago -- the highest annual rate since 1993, said the Office of National Statistics (ONS).

The surging costs will be passed on to consumers, who are experiencing the highest food bills for years and could end up paying almost L1,000 extra on their annual food bill than a year ago.

Families are already struggling to cope with the effects of the credit crunch. Petrol prices exceed £1 for a litre of unleaded fuel, while mortgage payments and credit card fees are also rising.

Now the price of groceries is increasing as weekly staples shoot up in price in supermarkets. The cost of a pint of milk has reached an all-time high of 33.5p and sliced bread costs a record L1.20 in big stores, a far cry from the 9p loaf that was available 15 years ago.

The company that makes Hovis said yesterday that it was raising prices by a further 4p a loaf, on top of the 12p by which they had risen in recent months, as it attempts to recover soaring wheat costs.

Last week it emerged that the first ever L100 Christmas turkey had gone on sale.

A survey by the website mysupermarket.com, which compares prices across online supermarket chains, found that the three biggest -- Tesco, Asda, and Sainsbury's -- are charging their shoppers 12 per cent more on average for a basket of 25 staple goods compared with last year.

This is despite high-profile price cutting campaigns.

That equates to an annual increase for most families of about L750, but is expected to climb further as world fuel prices cause inflation up again. A barrel of oil came close to $100 on the markets last week

Andrew Saunders, a leading food analyst at the City firm Panmure Gordon, said: "I've never seen food inflation like it. What we're seeing is pretty much all the manufacturing cost increases being offloaded straight to the retailers, who in turn are passing it immediately on to the consumer. Shoppers are picking up the tab right across the board."

Today, consumer inflation figures from the ONS are expected to show that grocery prices are rising, confirming economists' warnings that the era of cheap food is at an end.

After a decade of very low prices for most products in supermarkets, vegetables, milk, bread and meat are all expected to show substantial rises.

Prices on the global commodity markets have been in turmoil for 18 months as a series of poor harvests -- especially in Australia -- has led to lower supplies of wheat.

This has been combined with surging demand from India and China.

The combination of falling supply and rising demand has led to soaring grain prices, which in turn increases the cost of meat and dairy products as farmers seek to recoup the money they have had to pay for more expensive feed.

Butter prices in Britain rose by 18 per cent last month, while milk leapt by 12 per cent as dairy farmers were finally able to pass on some of their crippling costs to consumers.

Vicky Redwood, of Capital Economics, said: "Consumers have been surprisingly accepting of price increases, which suggests retailers will continue to push manufacturers' prices through."

In recent months food inflation has calmed a little, but the soaring cost of fuel is expected to stoke prices again.

Many basic foods are more influenced by the cost of oil than the actual ingredients. Wheat, for instance, makes up only about 7p of the cost of a loaf. This is completely outweighed by its baking, packaging and distribution costs, all of which are determined by the price of fuel.

Mr Saunders said: "There is only one way prices are going -- and that's up. Higher food prices are here to stay for some time."

The surging costs have prompted Gordon Brown to launch a wide-ranging investigation into the security of the nation's food supply, asking the Cabinet Office's strategy unit to examine how weather patterns are affecting global crops.

The higher weekly food bill is affecting families at the same time as rising council taxes and mortgage rates that have moved to a nine-year high.

Various staples have been subjected to higher prices over the past 12 months.

A kilo of peas has gone up from L1.19 to L1.79 at Tesco, a dozen eggs at Sainsbury's has leapt from L1.62 to L2.35, while Asda has increased the price of its orange juice from 73p a litre to 88p.

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