Figures from the United Nations (UN) show that global food prices are rising. The news comes alongside a warning from the British Retail Consortium (BRC) that UK consumers could face higher shopping bills. Here’s why it’s happening and what you can do about it.
How much are food prices rising by?
The UN’s Food and Agriculture Organisation (FAO) measures changes in global prices of food commodities. The FAO’s food price index (FFPI) tracks five essential raw ingredients that can help us predict what might happen to our average basket spend.
Overall prices rose by 4.8% in May compared to April, which is a year on year increase of 39.7%. It’s also the biggest monthly increase since October 2010.
This latest rise is the 12th rise in a row and reflects increases in all key food groups including cereal, dairy and sugar.
The greatest percentage increase was in vegetable oil, which saw a month on month uplift of 7.8%.
Why are food prices rising?
Food prices are rising for a number of reasons. Prices have been affected by lower production and increased demand. Also, the yields of some ingredients have fallen due to poorer growing conditions.
One major complication is the shipping industry, which has been hit hard by the pandemic. The cost of oil has risen from $35 (£25) per barrel to over $55 (£39).
Adding to the problem is the current scarcity of shipping containers. In fact, one UK trade association said that shipping costs had increased by up to 300% since the beginning of 2020.
Creating another set of problems is Brexit. The fact that the UK is now considered a third party and is not part of the EU trading club simply fuels border complications. In some instances, original contracts have been rejected and firms forced to pay more to transport their goods.
With the world still battling the effects of the pandemic, it’s unlikely that these logistical issues will be resolved any time soon.
When can we expect higher food prices?
It’ll take a while for the effects of shipping and rising food commodities to come through. But the BRC estimates we can expect to see prices rising from autumn.
The BRC also points out that the current fall in shop prices has already started to slow. In April, average prices fell by 1.3% year on year. This was below the average decrease from 12 and six months ago.
In May, the decline in store prices slowed even further, falling to just 0.6% year on year.
For some sectors, such as furniture and electricals, prices are already on the rise.
How to tackle rising prices
Higher shipping costs and rising food prices will need to be covered. Ultimately, that burden is likely to fall on consumers.
If or when that happens, the practical solution is to budget. To help you make your money go further as lockdown eases, take a look at our three tips to budget effectively and these breakthrough money management apps.
And if you like to err on the side of caution, you can read more about how to prepare for a financial emergency.